Land Value Taxation will solve many of the 21st century's most serious social, economic and environmental problems, and promote justice, fairness and sustainability. We CAN have a world in which all can prosper.

Search

Pages I refer to often

Progress and Poverty, by Henry GeorgeHere are links to online editions of George's landmark book, Progress & Poverty, including audio and a number of abridgments -- the shortest is 30 words! I commend this book to your attention, if you are concerned about economic justice, poverty, sprawl, energy use, pollution, wages, housing affordability. Its observations will change how you approach all these problems. A mind-opening experience!

Books I Value

Henry George: Progress and Poverty: An inquiry into the cause of industrial depressions and of increase of want with increase of wealth ... The RemedyThis is perhaps the most important book ever written on the subjects of poverty, political economy, how we might live together in a society dedicated to the ideals Americans claim to believe are self-evident. It will provide you new lenses through which to view many of our most serious problems and how we might go about solving them: poverty, sprawl, long commutes, despoilation of the environment, housing affordability, wealth concentration, income concentration, concentration of power, low wages, etc. Read it online, or in hardcopy.

Bob Drake's abridgement of Henry George's original: Progress and Poverty: Why There Are Recessions and Poverty Amid Plenty -- And What To Do About It!This is a very readable thought-by-thought updating of Henry George's longer book, written in the language of a newsweekly. A fine way to get to know Henry George's ideas. Available online at progressandpoverty.org and http://www.henrygeorge.org/pcontents.htm

Where Else Might You Look?

Wealth and WantThe URL comes from the subtitle to Progress & Poverty -- and the goal is widely shared prosperity in the 21st century. How do we get there from here? A roadmap and a reference source.

Reforming the Property Tax for the Common GoodI'm a tax reform activist who seeks to promote fairness and reduce poverty. Let's start with the enabling legislation and state requirements for the property tax. There are opportunities for great good!

Notes

40 posts categorized "sufficiency of land rent"

January 07, 2013

An Irish landlord, writing to the London Times, called particular attention to the fact
that, in case all the landlords should be expelled, the whole of
Ireland, outside of the large towns, would be left without a single
person whose annual income would exceed $1,500. To the wealthy
landlord who owns the Times,
this appalling fact seems to afford such conclusive proof of the
desolation and misery which would follow home rule that he deems it
superfluous to add a word of comment. He considers it quite enough
to say that no such state of things exists in any civilised country.
That it should be eventually brought about in Ireland, he evidently
believes, must be considered by every sane man as one of the most
frightful disasters which could befall the human race.

I am writing in Germany, the country from which have proceeded the
most important additions to the intellectual wealth of the world
during the last fifty years. The man who knows nothing of the
contributions made to history, to theology, to science, whether
abstract or applied, by German students, knows practically nothing
at all. What have been the income of the men who have thus enriched
the world! Rarely so much as $1,500; generally not half that amount.
Some of the world-famous German scholars accomplished their great
achievements on an income of less than $600 a year.

New England developed a marvelous degree of intellectual activity in
the colonial period of our history, though confined within a narrow
circle. But that was a period of small incomes and very little
accumulated wealth; nor did the few wealthy men contribute anything
of importance to the intellectual or moral development of the
people. What have the wealthy Irish landlords done for the
development of the Irish people in religion, morality or intellect?
What contribution has any wealthy Irish landlord ever made to
literature, science, art or high thought of any kind? What benefit
have these men of wealth conferred upon any part of the world in any
direction? They have just held a solemn meeting to answer these
questions, and their own testimony affords the best evidence against
them. They claim to have advised their tenants to improve their
stock, to introduce better methods of cultivation and to qualify
themselves generally to pay higher rents, while they themselves have
set excellent examples to their inferiors by taking good care of
themselves.

Many years ago a practical joker inserted an advertisement in a
daily paper to the following effect: "Wanted, by a young gentleman
of good birth and breeding, board in a respectable family, where his
Christian example would be considered sufficient compensation for
his board." The Irish landlords do not advertise, but they get
precisely that for which the young man advertised in vain. Their
Christian example, however, has been chiefly directed toward
hunting, horse racing and hard drinking. Certainly, down to a period
less than fifty years ago, all accounts of Ireland agreed in this;
and except that the drinking is conducted with more moderation,
there seems no reason to believe that there has been any change.

This, the third and final instalment, appeared in The Standard, October 22, 1887:

THE
DISTRIBUTION OF WEALTH.

BY THOMAS G. SHEARMAN.

III

Having reached the conclusion that indirect, or as the writer first
called it five years ago, "crooked" taxation is certain to produce
enormous inequality of wealth, that it is palpably and indisputably
unjust, and that it inevitably leads to that worst form of
inequality which involves the perpetual ownership of more than half
of the wealth of a country by less than the one-hundredth part of
its inhabitants, we are prepared to take up the next and final
question in our series.

What can be done to effect a more equal distribution of wealth,
without diminishing its production?

Again let us waive the discussion of rent. Having purposely avoided
all consideration of that tender subject, we will not take it up
just now. Assuming that rent can rightfully be private property, and
that the community is not to claim it, simply as rent — conceding
all that the champions of private property in land claim — let us
inquire what, nevertheless, remains to be done and ought to be done,
in order to prevent the unjust use of government to the injury of
the poor, and to check the artificial tendency toward the monopoly
of wealth by a hundredth part of the population.

A paragraph from "To Destroy the Rum Power," by Henry George, in the February, 1890, issue of The Arena. (The full article follows this single eloquent paragraph.) --

"Almost universal sobriety," wrote Adam
Smith in Kirkaldy, somewhere in the early seventies of the eighteenth
century. Writing as the wonderful nineteenth century nears its final
decade and in the great metropolis of a mighty nation then unborn, I
can say no more, if as much. The temperance question does not stand
alone. It is related — nay, it is but a phase, of the great social
question. By abolishing liquor
taxes and licenses we may drive the "rum power" out of politics, and
somewhat, I think, lessen intemperance. Thus we may get rid of an
obstacle to the improvement of social conditions and increase the
effective force that demands improvement. But without the improvement
of social conditions we cannot hope to abolish intemperance.
Intemperance today springs mainly from that unjust distribution of
wealth which gives to some less and to others more than they have
fairly earned. Among the masses it is fed by hard and monotonous toil,
or the still more straining and demoralizing search for leave to toil;
by overtasked muscles and overstrained nerves, and under-nurtured
bodies; by the poverty which makes men afraid to marry and sets little
children at work, and crowds families into the rooms of tenement
houses; which stints the nobler and brings out the baser qualities; and
in full tide of the highest civilization the world has yet seen, robs
life of poetry and glory of beauty and joy. Among the classes it finds
its victims in those from whom the obligation to exertion has been
artificially lifted; who are born to enjoy the results of labor without
doing any labor, and in whom the lack of stimulus to healthy exertion
causes moral obesity, and consumption without the need of productive
work breeds satiety. Intemperance is abnormal. It is the vice of those
who are starved and those who are gorged. Free trade in liquor would
tend to reduce it, but could not abolish it. But free trade in
everything would. I do not mean a sneaking, half-hearted, and
half-witted "tariff reform," but that absolute, thorough free trade,
which would not only abolish the custom house and the excise, but would
do away with every tax on the products of labor and every restriction
on the exertion of labor, and would leave everyone free to do whatever
did not infringe the ten commandments.

It is worth noting that Frances Willard, a major figure in the temperance movement, published, in 1896, An Up-to-Date Catechism. She saw the connection between poverty and intemperance, and recognized that the Single Tax could make all the difference in making life better.

August 22, 2012

As I listen to the 2012 party platforms, I am reminded of what they ought to be focused on, embodied pretty well in this platform from 1886-87.

PLATFORM OF THE UNITED PARTY.
Adopted at Syracuse August 19, 1887.

We, the delegates of the united labor party of New York, in state
convention assembled, hereby reassert, as the fundamental platform of
the party, and the basis on which we ask the co-operation of citizens of
other states, the following declaration or principles adopted on
September 23, 1886, by the convention of trade and labor associations of
the city of New York, that resulted in the formation of the united
labor party.

"Holding that the corruptions of government and the impoverishment of
labor result from neglect of the self-evident truths proclaimed by the
founders of this republic that all men are created equal and are endowed
by their Creator with unalienable rights, we aim at the abolition of a
system which compels men to pay their fellow creatures for the use of
God’s gifts to all, and permits monopolizers to deprive labor of natural
opportunities for employment, thus filling the land with tramps and
paupers and bringing about an unnatural competition which tends to
reduce wages to starvation rates and to make the wealth producer the
industrial slave of those who grow rich by his toil.

'“Holding, moreover, that the advantages arising from social growth and
improvement belong to society at large, we aim at the abolition of the
system which makes such beneficent inventions as the railroad and
telegraph a means for the oppression of the people and the
aggrandizement of an aristocracy of wealth and power. We declare the
true purpose of government to be the maintenance of that sacred right of
property which gives to every one opportunity to employ his labor, and
security that he shall enjoy its fruits; to prevent the strong from
oppressing the weak, and the unscrupulous from robbing the honest; and
to do for the equal benefit of all such things as can be better done by
organized society than by individuals; and we aim at the abolition of
all laws which give to any class of citizens advantages, either
judicial, financial, industrial or political, that are not equally
shared by all others."

We call upon all who seek the emancipation of labor, and who would make
the American union and its component states democratic commonwealths of
really free and independent citizens, to ignore all minor differences
and join with us in organizing a great national party on this broad
platform of natural rights and equal justice. We do not aim at securing
any forced equality in the distribution of wealth. We do not propose
that the state shall attempt to control production, conduct
distribution, or in any wise interfere with the freedom of the
individual to use his labor or capital in any way that may seem proper
to him and that will not interfere with the equal rights of others. Nor
do we propose that the state shall take possession of land and either
work it or rent it out. What we propose is not the disturbing of any man
in his holding or title, but by abolishing all taxes on industry or its
products, to leave to the producer the full fruits of his exertion and
by the taxation of land values, exclusive or improvements, to devote to
the common use and benefit those values, which, arising not from the
exertion of the individual, but from the growth of society, belong
justly to the community as a whole. This increased taxation of land, not
according to its area, but according to its value, must, while
relieving the working farmer and small homestead owner of the undue
burdens now imposed upon them, make it unprofitable to hold land for
speculation, and thus throw open abundant opportunities for the
employment of labor and the building up of homes.

While thus simplifying government by doing away with the horde of
officials required by the present system of taxation and with its
incentives to fraud and corruption, we would further promote the common
weal and further secure the equal rights of all, by placing under public
control such agencies as are in their nature monopolies: We would have
our municipalities supply their inhabitants with water, light and heat;
we would have the general government issue all money, without the
intervention of banks; we would add a postal telegraph system and postal
savings banks to the postal service, and would assume public control
and ownership of those iron roads which have become the highways of
modern commerce.

While declaring the foregoing to be the fundamental principles and aims
of the united labor party, and while conscious that no reform can give
effectual and permanent relief to labor that does not involve the legal
recognition of equal rights, to natural opportunities, we nevertheless,
as measures of relief from some of the evil effects of ignoring those
rights, favor such legislation as may tend to reduce the hours of labor,
to prevent the employment of children of tender years, to avoid the
competition of convict labor with honest industry, to secure the
sanitary inspection of tenements, factories and mines, and to put an end
to the abuse of conspiracy laws.

We desire also to so simplify the procedure of our courts and diminish
the expense of legal proceedings, that the poor may be placed on an
equality with the rich and the long delays winch now result in
scandalous miscarriages of justice may be prevented.

And since the ballot is the only means by which in our Republic the
redress of political and social grievances is to besought, we especially
and emphatically declare for the adoption of what is known as the
“Australian system of voting,” an order that the effectual secrecy of
the ballot and the relief of candidates for public office from the heavy
expenses now imposed upon them, may prevent bribery and intimidation,
do away with practical discriminations in favor of the rich and
unscrupulous, and lessen the pernicious influence of money in politics.

In support or these aims we solicit the co-operation of all patriotic
citizens who, sick of the degradation of politics, desire by
constitutional methods to establish justice, to preserve liberty, to
extend the spirit of fraternity, and to elevate humanity.

July 14, 2012

Has no one in California figured out that when the calf is deprived of mother's milk, starvation is inevitable?

It has taken 34 years, but it is coming about.

Feeding calves grain, or seaweed, or sunflower seeds isn't as smart as letting it consume its natural food.

Taxing wages, sales and buildings isn't as smart as collecting the lion's share -- calf's share, if you will -- of the land rent for public purposes.

Proposition 13 was designed to make sure that the cows' milk was kept for the Irvines, the big landowners, the commercial property owners, and the longtime homeowners, while providing a diminishing fifth of it to the calf and supplementing with grain, seaweed and sunflower seeds.

The calf's digestive system has blown up because it was deprived of its proper food, and "nourished" with stolen fake food.

The following list comprises the most commonly asked questions about the concept of making land and resource rentals the source of revenue for government. As you continue this study, you will see the value from giving resources the respect they deserve and the benefits resulting from the freeing of labour, production and exchange from taxation. If you have any questions which are not covered here, or observations you would like to put to our panel, please feel free to do so by sending your question as an e-mail query and we will attempt to respond.

The inclusion of land and resources in the economic equation is central to any solution for revenue raising. A taxation solution which does not consider the nature of taxation itself and allows the continuing private monopolisation of community land and resources fails to recognise the essential role land plays in the economic equation and will not work. Land is the only element in the economic equation which is both fixed and finite. It can be monopolised. It is a unique class of asset which must be treated accordingly. If we were to wrest not the land itself, but its unimproved value from private monopolies and return the value to the community — whose very presence creates it — then we would have reduced many problems in one stroke with great benefit to production, to the environment and to the cause of individual freedom and justice.

On the subject of land and resource rents, Henry George said this:

The tax upon land values is the most just and equal of all taxes. It falls upon those who receive from society a peculiar and valuable benefit, and upon them in proportion to the benefit they receive. It is the taking by the community, for the use of the community, of that value which is the creation of the community. It is the application of the common property to common uses. When all rent is taken by taxation for the needs of the community, then will the equality ordained by nature be attained.

March 30, 2012

Land, which nature has destined to man's sustenance, is the only source from which everything comes, and to which everything flows back, and the existence of which constantly remains in spite of all changes. From this unmistakable truth it results that land alone can furnish the wants of the state, and that in natural fairness no distinctions can be made in this.

March 28, 2012

The following proposal seems to me to be more practicable, viz. . . to establish quit-rents on all past grants. . . The quit-rents would in this case be sufficient to support the government, and if they were applied to that purpose I believe would give a general satisfaction; because it would be as equal a taxation as could well be contrived, and the taxes would not, as they do now, fall only upon the improvements and the industry of the people.

If all men were so far tenants to the public that the superfluities of gain and expense were applied to the exigencies thereof, it would put an end to taxes, leave never a beggar and make the greatest bank for national trade in Europe.

March 26, 2012

Let the fields and all the soil, and, if possible, even the houses, belong to the state, that is, to him which is the depositary of the right of the state, so that he may let them out for an annual rent to the inhabitants of the cities and the cultivators. This will exempt all citizens from extraordinary taxes in time of peace.

February 27, 2012

27. A new subway line costs $2 billion. Suppose that its construction increases the surrounding land values by $2 billion. (Assume 5 miles long, 10 stations, 0.5 mile radius, average lot size of 0.10 acre. How should the new subway line be financed?

February 22, 2012

The taxation of all property at a uniform rate is made necessary by the constitutions of about three-fourths of the States of the Union. The taxes on chattels, tools, implements, money, credits, etc., find their condemnation from the Single Taxer's point of view in those ethical considerations which differentiate private from public property. Where there arises a fund known as "land values," growing with the growth of the community and the need of public improvements, it is not only impolitic, it is a violation of the rights of property to tax individual earnings for public expenses.

The value of land is the day-to-day product of the presence and communal activity of the people. It is not a creation of the title-holder and should not be placed in the category of property. If population deserts a town or portions of a town, the value of land will fall; the land may become unsalable. When treated as private property the owner of land receives from day-to-day in ground rent a gift from the community; and justice requires that he should pay taxes to the community proportionate to that gift.

"Land value" or "ground rent" as the older economists termed it, is a tribute which economic law levies upon every occupant of land, however fleeting his stay, as the market price of all the advantages, natural and social, appertaining to that land, including necessarily his just share of the cost of government.

January 18, 2012

I'm reading through some of my grandparents' files of correspondence; they were great correspondents, and kept carbons of their outgoing letters and originals of what they received. This is an excerpt from a 1957 letter from the executive secretary of a foundation which sponsored my grandfather's work, Vie Peterson (also a wonderful correspondent!) and was written in response to a draft of a document he was assembling as an introduction to Henry George. (A much later version of that paper is available here.)

Vie wrote,

"Should we elaborate why George insisted on one tax? He felt that the economic rent of land was the true national income. He felt any tax on production was a form of penalty on man's industry and thrift. He felt that every step forward that man makes in raising himself and in improving civilization as a whole would be reflected in land values and provide an increasing source of revenue which he believed would be sufficient for the national needs. As a family lives on a set income, George believed that a nation should do likewise. It would be necessary, it seems to me, to indicate that at the present time with the national debt so high and with other complications a tax on land values alone might not be sufficient, but the purpose of this statement is to show what George had in mind in his day which was not burdened with debt as is our own?

In another, slightly earlier, letter, Vie writes,

"... George believed that easy access to land would overcome unemployent, would eliminate reliance on government aid, and therefore simplify government structure, etc. "

December 18, 2011

When the structures that our laws and traditions create provide opportunities for someone to capture a windfall, should we blame the fellow who "takes advantage" of those structures, or should we respond by studying and correcting those structures and laws?

Winston Churchill, in his speeches under the baanner "The People's Rights," in 1909, said this:

I hope you will understand that when I speak of the land monopolist I am dealing more with the process than with the individual landowner. I have no wish to hold any class up to public disapprobation. I do not think that the man who makes money by unearned increment in land is morally a worse man than anyone else who gathers his profit where he finds it in this hard world under the law and according to common usage. It is not the individual I attack, it is the system. It is not the man who is bad, it is the law which is bad. It is not the man who is blameworthy for doing what the law allows and what other men do; it is the State which would be blameworthy were it not to endeavour to reform the law and correct the practice. We do not want to punish the landlord. We want to alter the law.

The 99% need to start identifying the laws and structures that must be adjusted. This is not easy work.

What individuals produce, and corporations produce, should not be "there for the taking" -- be it by corporate management in the form of hugely generous compensation packages and golden parachutes, or by simply saying "these resources are OURS, not everyone's" or by establishing monopolies or duopolies or other such structures. We-the-people need to educate ourselves about how things are done now, who benefits from that, and what alternatives exist. It won't be easy. We'll be challenging special interests who somehow think they're entitled to their advantaged positions, and the rest of us exist to keep them comfortable.

Labor should get its share, and capital should get its share, and we-the-people should get land's share. That last could fund a large portion of our common spending, on infrastructure and services, and permit us to reduce or eliminate the dumb taxes which take which individuals and corporations legitimately create. That "keeping what we create" extends, also, to "externalities," to being responsible for the pollution we create, and setting up incentives so that it is minimized, for the good of all of us now here and the good of future generations.

I think it is quite possible, even likely, that a few years after we've made this shift in who gets what, we'll find that we don't need nearly so robust a social safety net, and that we-the-people may get some of "land's share" back in the form of a Citizen's Dividend, just as all permanent residents of Alaska receive an annual dividend from the Alaska Permanent Fund.

In any case, letting some corporations and some individuals grab that which we all create together is just plain wrong. Letting it be "there for the taking" is insanity and injustice. And don't we pledge "liberty and justice for all?"

Our ancestors may have granted some privileges to some lucky folks for one reason or another. That doesn't mean that we can't, politely and firmly, revoke those privileges. A couple of centuries is plenty. Experience has shown us that those privileges don't serve the greater good, and it is time to revoke them. Will the privileged give up those privileges graciously? Quite possibly not. But the first step is to identify them, and then to seek to change the system so that those rightly-common assets aren't "there for the taking."

December 03, 2011

How does this strike you? If this is the first thing you've read here, it may seem very odd to you. I invite you to explore the ideas involved, through the tags (below this post) and in the cloud, at left. Comments welcome, of course!

Single Tax Platform

The single taxers of Delaware are conducting a red hot campaign. The single tax will be the issue in that state this fall, and Justice, the state single tax organ, published the following as their Single Tax Platform:

We assert as our fundamental principle, that all men are equally entitled to the use of the earth;

Therefore, No one should be permitted to hold land without paying to the community the value of the privilege thus accorded; and from the fund so raised all expenses of government should be paid. We would therefore abolish all taxation, except a tax upon the value of land exclusive of improvements. This tax should be collected by the local government and a certain proportion be paid to the state government.

This system of taxation would dispense with a horde of tax-gatherers, simplify government and greatly reduce its cost.

It would do away with the corruption and gross inequality inseparable from our present methods.

It would relieve the farmer, the workman and the manufacturer of those taxes by which they are unjustly burdened, and take for public uses those values due to the presence of population.

It would make it impossible for speculators to hold land idle, and would open unlimited opportunities for the employment of labor and capital, which is essential to the solution of the labor problem.

November 04, 2011

I am including this because I find it timely and timeless; because it provides a good simple mathematical look at the perversity of our current tax system, and because it illustrates my notion that when Leona Helmsley said "WE don't pay taxes; the little people pay taxes," she was not describing tax evasion but actual tax structures.

Henry George, Jr., was a U. S. Congressman. His most famous writing is "The Menace of Privilege."

WHO ARE THE CRIMINALS?

BY HENRY GEORGE , JR.Copyright, 1901, by The Abbey Press, 114 Fifth Avenue, New York

I. Who are the Criminals? 5 II. French Aristocracy of Privilege 6 III. New York Aristocracy of Privilege 10 IV. Robbery of Masses by Classes 12 V. Nature and Extent of Robberies 13 VI. How to Stop the Robberies 18 VII. The Criminals 23

I. WHO ARE THE CRIMINALS?

In considering the problem of how to check or control vice and crime in New York the question at once raised is: Who are the criminals? Who are they who cause these dreadful evils in the community? For unless we know exactly where the disease lies how can we attempt a remedy?

II. FRENCH ARISTOCRACY OF PRIVILEGE.

When the French Revolution broke loose the people followed the lead of men who seemed no better than a pack of devils, for they maimed, they brutally tortured and they slew. Women, whose only offense was that they were members of an arrogant and grinding aristocracy, were stripped naked, treated with every indignity and killed with every mark of ferocity. Old men and young children belonging to the upper classes were butchered, and persons of blameless life and humane intention were trampled under foot when they attempted to stay the carnival of blood.

Who will dare say that these revolutionary leaders, these butchers, were not criminals — criminals whose bloody hands must shine down through history? They were men turned to monsters; brutes with human intelligence, striving for new ways to torture and kill.

But whence came they? Not from without. They sprang up within. They represented the spirit of retaliation — of fiendish retaliation for the centuries of wrong done them and theirs. They were the progeny of poverty made by robbery. Their deeds were the deeds of monstrous criminals, but they themselves were the spawn of hideous injustice — an injustice that gave to the few riotous feasting and gorgeous raiment and to the many rags and black bread filled with maggots.

The aristocrats during centuries of power had appropriated the soil of France, and all other Frenchmen had to purchase the privilege of living in their native country. Not content with this, the upper classes had thrown upon the masses all those heavy taxes which it was the plain intent only the landowners should bear. They shifted upon the common people all the expenses of an extravagant, aristocratic government, and through ground rents sucked away all the people's remaining substance, save just enough to keep them alive and at work. Who were making the masses so poor and wretched was as plain as day. The masses themselves could see, and when they raised the sword against the aristocracy all hell seemed to break loose.

Who were the criminals? Why, of course they were criminals — horrible, revolting criminals — who did this guillotining, who committed these butcheries.

But who made these criminals? Clearly those who bore so heavily upon the people — the aristocrats, who kept the people in fearful poverty and ignorance which bred the spirit of bloodthirsty tigers.

The aristocracy, therefore, were the primary, the real criminals.

III. NEW YORK ARISTOCRACY OF PRIVILEGE.

I wish to proceed with greatest caution, with utmost conservatism. Yet candor compels me to ask: Have we not in our community an aristocracy of privilege — an aristocracy far more rich, far more powerful than was the aristocracy of old France? And have we not a corresponding poor class? Is it not true that half the population of Manhattan Island is living in what Ex-Mayor Hewitt rightly calls "those terrible tenements?"

That Prince of the Church, Bishop Potter, has proposed in the emergency that we have noonday prayer meetings. By all means, we all say. Let us bow ourselves before Almighty God and ask for relief from this social scourge. Yet what if, while we pray, we abate not the power of our aristocracy of privilege; what if we do nothing to mitigate the poverty of the million tenement dwellers?

The distinguished divine has also proposed a military police. If that were good, would not a local standing army be better? It would keep order, at least for a time. But would it cure the general poverty among the masses? Would it not rather act like a lid fastened down on a volcano — work well, until fire and molten stone and destruction belched forth? What then?

IV. ROBBERY OF MASSES BY CLASSES.

Assuming that we are sincerely trying to make civic conditions better, that we are seeking a cure (if there be a cure) for the general vice and crime in the community, should we not ask ourselves some plain questions? Is it not the truth that we have an aristocracy? Is it not the truth that we have a poor class? Is it not certain that the rich are growing richer and the poor poorer and more numerous?

I believe that there can be but one answer — yes.

Yet I can see no reason for this state of things unless it be that the classes are robbing the masses.

V. NATURE AND EXTENT OF ROBBERIES.

LET us consider how the classes may be robbing the masses into poverty.

It is said that when the first Dutchmen came sailing into New York Bay they bought Manhattan Island for $24. That was for the land alone, no houses or other improvements being here. Today the selling value of the bare land of this same Manhattan Island is at least $3,000,000,000. Those who possess the land of this island, now get what is equivalent to a ground rental of $150,000,000 a year, with this sum steadily swelling. The ground rental of Greater New York cannot be less than $225,000,000 yearly.

This vast sum is paid over to the landlord aristocracy — for what? For doing nothing. The people multiplied from a ship's crew to several millions in and about the island and behold! the vast value of land which in the beginning sold for but $24. The increment of value obviously has not been produced by individuals; it is entirely aside from and in addition to the value of improvements, which spring from human labor, which are produced by individuals. This increase in land value is a publicly-made value. It of right belongs to all the people. Do all the people get it? No, the few whom we recognize as the owners of this land claim that value and get it. The people at large in the community get nothing. Do not these landed aristocrats — of which the old French nobility were in many respects prototypes — rob the community? Do they not go far toward robbing a large part of the people into poverty?

Take another instance of robbery of the many by the few. Observe what we are doing about public franchises. A public franchise is a public right of way, a public highway. Modern civilization, with its intense centralization, its condensed population, and its interdependence of individuals, makes these highways of vital importance to the community. They are the arteries of the body-social, the channels of intercommunication and transportation, of heat, and water, and light, and power, and sewage. Were they suddenly destroyed, a large part of the population would die as quickly as a member of the human organism withers up and dies when the flow of blood is cut off from it.

Then if these public franchises, these public rights of way, these public highways, are so vital to the body-social, so necessary to the well-being of the people, what should be our policy toward them? What is our policy toward them? Why, in the case of water and sewage we treat them as public property, operating them publicly through public officials. But what do we do in respect to the other franchises? What do we do regarding street railroads, telephones and telegraphs, electric lighting and heating and gas, and steam supply? All these public franchises are treated as if they were private franchises. Upon all these public highways we allow private individuals to set the claim of ownership; to make charge upon the people; make charge upon the body-social for its blood, as it were. And a conservative estimate of the annual value of these public franchises in Greater New York at this time is $30,000,000.

Here, then, we have two forms of grand, constant, continuous robbery of the people — an aristocracy of privilege appropriating public ground rents and public franchise values, so that a few of the population are enabled to live in palaces while a million crowd into tenements.

VI. HOW TO STOP THE ROBBERIES.

Now the masses of the people of Greater New York lose annually by the appropriations of the landed and franchise aristocracy —

In ground rents

$225,000,000

In franchise values

30,000,000

While they are compelled to pay in various taxes for the support of local government

98,000,000

Which makes in all

$353,000,000

What shorter way is there to relieve poverty and to do social justice than to abolish the $98,000,000 of general taxes, which fall mainly upon industry or the fruits of industry and terribly hamper the masses of the people; and then what more simple than to appropriate for local governmental expenses that sum out of the $225,000,000 of publicly-made land values? Why not further lighten the load of the masses by taking over into public ownership and management all public municipal franchises, just as are water and sewage now; and then why not cut down their cost of service to the public that $30,000,000 which now represents purely franchise value in the charges of the private corporations that possess and manage them?

For a third step, why not make these municipal utilities free to the public, meeting the expense of their operation by another appropriation of the publicly-made land values?

And for a fourth step, why not appropriate for an old-age pension to every citizen, rich and poor alike, for public parks, for public lectures and concerts, or for any other or for all such purposes — all that still remains of the publicly-made land values?

What would be the result of such a policy? It would be that all the people in Greater New York would be relieved of the burden of $98,000,000 of various taxes; that the great charge of the many branches of the public franchise service on the people would be entirely wiped out and abolished; and that the whole of land values, that is, of ground rents, would be enjoyed by all the people equally, being appropriated for public uses.

Would this make any difference in the community? The welkin is made to ring by the most influential of the tax-payers when, under present conditions, the taxation authorities raise or lower the tax rate even 1%. What, then, would happen if all taxation were lifted from the fruits of toil, if public utilities were made free, and if land values were to benefit, not a class, but the whole people?

Such a tax would be just, because it would fall on this publicly-made value; it would be certain, because land cannot be hidden or lessened in amount; it would force all unused or inadequately used valuable land into its highest use, for no one could afford to hold such land vacant for a speculation, as very many do now.

Land in Greater New York would therefore be cheaper — how much cheaper may be judged by the fact that two-thirds of the land within the city limits, though extremely valuable, is not now used. This unused land would compete with the used land for users, so that land values in the community generally would fall. At the same time all building materials, being relieved of present taxation, would be far cheaper, making two of the chief elements for house building would be greatly less in cost, and consequently, larger, lighter, better dwelling accommodations in every way could and would be supplied to the masses of the people, and especially to the million now living in tenements.

What would help the poorest would be of direct and indirect benefit to all others in the community; and this would be but one of a large harvest of good results that the people would reap from such a policy.

The privileged classes, the aristocrats, would lose their privileges, but they would have no less rights than any and all other citizens of Greater New York.

VII. THE CRIMINALS.

That able and public-spirited citizen, Mr. President Baldwin, of the Long Island Railroad, and Chairman of the Chamber of Commerce Anti-Vice Committee of Fifteen, has said that this is not the time for "idealist scheme of reform." But we are trying to put down vice and crime in the community; and the question is: Who are the criminals?

Let us be frank with ourselves: Who are the criminals? Are they the housebreakers, the unfortunate women who walk the streets and the police officials who take blood-money? Or are they those who rob the masses of the people into poverty — deep, biting, degrading poverty?

Are not the aristocrats of privilege, knowingly or unknowingly, the criminals we should first consider in an examination of civic disease in New York?

October 15, 2011

I have a family member who, when Herman Cain says "9-9-9," plays a sound bite of another voice shouting "nein! nein! nein!"

Georgists have a better proposal for how we ought to fund our common spending.

0% tax on wages

0% tax on sales

0% tax on corporate profits

0% tax on buildings and equipment

100% recovery of our commonwealth

This probably raises several questions in your mind:

what is "recovery of our commonwealth"?

how will it affect me?

Our commonwealth includes the value of land -- not the improvements made by the present or previous owner, but the value of the site itself, which is created by the gifts of nature; by the investment of the local, state and national communities in public goods and services (including most "pork"); by the presence of the community and its economic activity. While good farmland may be worth $5,000 or $10,000 per acre, depending on climate and proximity to markets, suburban residential lots might be $35,000 to $1,000,000 -- or far more! -- per acre, and an acre in midtown Manhattan can be worth $250,000,000 or more. The landholder doesn't create that locational value.

Our commonwealth includes the value of ecosystem services. It includes the value of electromagnetic spectrum (the airwaves which most people would agree rightly belong to the American people, not to corporations). It includes the value of water, particularly fresh water for drinking and water for irrigating crops and for corporate use. It includes the value of government-granted privileges. It includes the value of geosynchronous orbits -- those parking spots in space for satellites whose owners and customers would not want to see crashing into each other. It includes the value of landing rights at busy congested constrained airports, such as LaGuardia or JFK, particularly at their rush hours. It includes the value of scarce on-street parking in congested cities. It includes the value of nonrenewable natural resources extracted from below the earth and the oceans, for 200 miles beyond our land borders. It includes a whole range of other similar things.

As you look at that paragraph, compare it to the 0-0-0-0 list above, and notice that it collects upfront certain values, and leaves the rest to those who produce. It is direct taxation rather than indirect, and one could reasonably argue that it isn't even really taxation; rather it is more in the nature of a user-fee.

It is Natural Public Revenue.

Once one has sat with this idea for a while, it seems quite unnatural to permit the value to continue to accrue to private individuals, or to corporations publicly or privately owned, or to entities other than the community as a whole!

Recall how concentrated wealth is in the US: The 2007 SCF [the Federal Reserve Board's Survey of Consumer Finances] reported that aggregate net worth is "distributed" as follows:

Top 1% of us have 33.8%

Next 4% of us 26.6% [cumulative: 60.4%]

Next 5% of us 11.1% [cumulative: 71.5%]

Next 40% of us 26.0% [cumulative 97.5%]

Bottom 50% of us 2.5%

Recall also that the Forbes 400 families are specifically and intentionally omitted from the SCF, and that Forbes estimates that they represent 2.5% of aggregate net worth. So add that 2.5% to the numerator and denominator. And note, as Michael Moore did, that it is very similar to the value of the Net Worth of the bottom 50% of us.

And it seems quite unnatural to tax wages, and sales, and corporate profits, and buildings at all before we've fully collected Natural Public Revenue.

Will Natural Public Revenue be sufficient to meet all the needs of all levels of government?

Quite possibly not, at least today when we are so reliant on a social safety net because current conditions have kept a significant share of our people from providing well for themselves. But I regard it as altogether possible that within a generation or two, it could be quite sufficient, in part because it would have the effect of redistributing some of the wealth which today is pouring into the pockets of a relative few of us.

How much of corporate profits are coming from (quite legal) privatization of the value of natural resources, the value of being able to get away with polluting air, water and soil, and the value of other privileges which corporations -- public and private -- are used to enjoying? One of the interesting findings in the SCF is that the value of privately held businesses [BUS] actually exceeds the value of publicly held ones [EQUITY] in household wealth -- and the value of both is highly concentrated:

Consider, too, how much more of this value the Forbes 400 have! These two categories represent 21.2% and 23.1% of aggregate net worth held by the rest of us -- a total of 44.3%. Most of the 2.5% is likely in these two categories. I'll leave the math to you.

October 06, 2011

In September, 1889, Thomas Shearman, co-founder of the NYC law firm Shearman & Sterling, published an article in The Forum, entitled "Henry George's Mistakes." This was ten years after the publication of Henry George's "Progress and Poverty," which was, by that time well known to most Americans and many in other parts of the world; by 1900, P&P had sold something like 6 million copies and been serialized in many periodicals. As the first paragraph shows, George's ideas were controversial, particularly with the vested interests who were more than happy with the current structure, and were in a position to spend to influence public opinion.

Shearman is responding to those who thought that George's Remedy (the subtitle to P&P is "An inquiry into the cause of industrial depressions and of increase of want with increase of wealth ... The Remedy") was unrealistic, and in particular, to an 1887 article in The Forum.

Shearman shows why indirect taxes raise prices and the cost of living, particularly for the poor. Recall Leona Helmsley's statement about taxes: "We don't pay taxes. The little people pay taxes." I don't think she was talking about tax evasion; she was talking about tax structures.

I've taken the formatting liberty of presenting some lists contined in paragraphs as bullet points.

HENRY GEORGE'S MISTAKES.

Since the mistakes of Moses were so triumphantly demolished by Col. Ingersoll, his example has been followed by numerous writers, who, possibly because they concluded that the Mosaic field has been sufficiently occupied, have devoted themselves to an equally triumphant demonstration of the mistakes of Henry George. Space could not be afforded for even an abstract of these brilliant productions. Crushed by the Duke of Argyll, refuted by Mr. Mallock, extinguished by Mayor Hewitt, undermined by Mr. Edward Atkinson, exploded by Prof. Harris, excommunicated by archbishops, consigned to eternal damnation by countless doctors of divinity, put outside the pale of the Constitution by numberless legal pundits, waved out of existence by a million Podsnaps, and finally annihilated by Mr. George Gunton, still Henry George's theories seem to have a miraculous faculty of rising from the dead. For it is certain that his general doctrines are more widely believed in today than ever before; while the one practical measure which he advocates for present and immediate enactment is accepted by a vast number of intelligent men on both sides of the Atlantic. It is, therefore, still worth while to look into this terrible delusion, and to inquire seriously what are these fatal mistakes which, being so often slain, nevertheless live.

Mr. George has devoted a large portion of his famous book, "Progress and Poverty," to the assertion and illustration of his belief that, all over the civilized world, the rich are growing richer and the poor relatively poorer. He undertakes to trace the cause of this assumed evil to the private ownership of land and the steady increase of economic rent. He insists, with admitted eloquence and earnestness, that private ownership of land must be abolished; but he proposes one remedy and only one, the concentration of all taxes upon ground rent alone. He urges that these taxes should be increased to such an amount as will absorb ground rent. This, in view of statements made by all Mr. George's opponents, would seem to be really only a matter of detail, concerning which any one might be at liberty to entertain, as Mr. Disraeli used to say, a "pious opinion." For they all, with one voice, maintain that ground rent would never be sufficient to meet the existing taxes; and so this question, if any of Mr. George's critics are correct, could never arise.

To a practical mind there are only two important questions involved in this controversy.

First, is there any undesirable tendency toward the concentration of wealth in the hands of a few?

Secondly, is the concentration of all taxes upon ground rent alone a real, just, and effective remedy?

Let us inquire whether there is any excessive concentration of wealth going on in the United States of America. Leaving mere clamor and unsupported assertions out of consideration, on either side, let us look into facts. As lately as 1847, there was but one man in this country who was reputed to be worth more than $5,000,000; and though some estimated his wealth at $20,000,000, there is no good reason for believing it to have been so great. The wealth of his lineal descendants is estimated at $250,000,000, or over $50,000,000 each. In 1867, in the New York constitutional convention, one of the most prominent delegates stated that he could name 30 men, residing in that State, whose wealth averaged $15,000,000 each. The St. Louis "Globe" recently published a list of 72 persons who were worth, collectively, the whole amount of our national debt, averaging $18,000,000 each. The wealthiest railroad manager in America, in 1865, was worth $40,000,000, but not more. His heir died recently, leaving an estate of nearly $200,000,000; and there are several gentlemen now living who are worth over $100,000,000 each. Within a short period, a number of quiet, unobtrusive men, of no national fame, have died in Pennsylvania, leaving estates of over $20,000,000 each. Twenty living persons, in the oil business, are reputed to be as rich. Forty persons could be easily named, none of them worth less than $20,000,000, and averaging $40,000,000 each. At the lowest reasonable estimate, there must now be more than 250 persons in this country whose wealth averages over $20,000,000 for each. But let us call the number only 200. Income-tax returns in Great Britain and in the United States show that, in general, the number of incomes, when arranged in large classes, multiplies by from three to five-fold for every reduction in the amount of one-half.* For extreme caution, however, we estimate the increase in the number of incomes at a very much lower rate than this. At this reduced rate, the amount of wealth in the hands of persons worth over $500,000 each in the United States would be about as follows:

200 persons at

$20,000,000

$4,000,000,000

400

10,000,000

4,000,000,000

1,000

5,000,000

6,000,000,000

2,000

2,500,000

5,000,000,000

6,000

1,000,000

6,000,000,000

15,000

500,000

7,500,000,000

$31,500,000,000

* In Brooklyn, N. Y., in 1865, the tax returns showed one income of $600,000, 2 incomes of $200,000, 11 incomes of $100,000, 61 incomes of $50,000, 1,700 incomes averaging $7,000. See also the "Cyclopedia of Political Science," art. "Income Tax."

In Great Britain, in 1872, 3 landlords averaged each $1,100,000 rent, 14 averaged $675,000, and 83 averaged over $250,000. In 1884, the returns of business profits, only, showed 104 incomes averaging $450,000,1,192 of $85,000, 1,871 of $32,000, and 20,534 of $9,000.

This estimate is very far below the actual truth. Yet, even upon this basis, we are confronted with the startling result that 25,000 persons now possess more than half of the whole national wealth, real and personal, according to the highest estimate ($60,000,000,000) which any one has yet ventured to make of the aggregate amount. Nor is this conclusion at all improbable.

Let us test the question in another way. Eastern savings banks show an average deposit of $365. This sum represents the extreme savings of the average thrifty workingman of the East. But even estimating that 20,000,000 workers of 1889, earning an average of less than $400 each, of whom 5,000,000 are women and children, have saved, on the average, $600, still, their aggregate savings would not amount to $12,000,000,000, or $1,100 for each average family. Let us suppose that the 1,000,000 workers of superior class, earning an average of $1,000 each, have saved $3,000 — a monstrous exaggeration. This would make their total possessions $3,000,000,000. The result would be to show that 21,000,000 persons had saved up in the whole course of their lives $15,000,000,000, leaving $45,000,000,000 in the possession of not more than 400,000 persons.

Look again. Excluding churches, public buildings, etc., from the items of wealth enumerated in the census estimate for 1880, it is reduced to $41,000,000,000. Railroads, telegraphs, shipping, mines, quarries, canals, merchandise, and specie count for $13,500,000,000. These certainly do not belong to $400 workingmen. $5,000,000,000 is charged to household furniture, paintings, and jewelry. Two-thirds of this would be an extreme allowance for the 9,700,000 families of the poorer class; but let us allow them more, and estimate the furniture of the 300,000 richer families at only $5,000 each. Farms stand for $10,000,000,000, of which more than one-fourth were owned by landlords and leased to tenants, while one-fifth were so large as to imply wealthy owners; and mortgages were certainly outstanding for more than one-fifth of the rest. Business and residential real estate, water-power, etc., were estimated at about the same value. Of this, at least three-fourths was owned by the wealthy class, either absolutely or by mortgages. On this basis we arrive at the following estimate of the possessions, in 1880, of not more than 300,000 persons:

Railroads, shipping, mines, merchandise, specie, etc.

$13,500,000,000

Farms, 45 per cent

4,500,000,000

Mortgages on farms, 20 per cent

1,000,000,000

Other real estate

7,500,000,000

Furniture, etc.

1,500,000,000

$28,000,000,000

The total national wealth held as private property being $41,000,000,000, this estimate confirms the previous one, that a small minority of the people own two-thirds of the national wealth. Is Mr. George so very much mistaken, in view of these figures, when he asserts that the rich are growing richer and the poor relatively poorer?

A sufficient cause for the immense and growing chasm between the rich and the poor of this country is to be found in indirect taxation. The population of the United States has increased in 25 years from 35,000,000 to 60,000,000. Let us call the average 45,000,000. The average annual taxes for the same period have been about $175,000,000 on imports, $136,000,000 on domestic productions, $14,000,000 on incomes, $25,000,000 miscellaneous, and $300,000,000 State and local taxes, mostly on houses and improvements and personal property. Duties on imports have entailed an average increase of prices on domestic goods to the amount of fully thrice the duties, say $525,000,000. Excise duties, by promoting monopolies, have largely increased prices, as in the well-known case of matches, where a duty of one cent caused an increase in price of' two cents. Let us, however, call this increase only one-fifth of the excise, or $27,000,000. But upon these taxes there are three profits, made by the importers or manufacturers, the jobbers, and the retailers, amounting to not less than 20% in all, or $172,600,000. Two-thirds of the State and local taxes are paid by middlemen, who of course add a profit; but this may be put as low as 5%, or about $10,000,000. The grand total now comes to $1,384,000,000 per annum, as the average annual burden borne by the people for 25 years past. Of this all was indirect taxation, except something over $100,000,000; leaving the average annual burden imposed by indirect taxation at $1,280,000,000.

This burden was distributed as equally as possible by natural laws, in proportion to the expenditure of each income-receiver in the support of his family. As each worker supported, on the average, three persons, including himself, the people may be divided into 15,000,000 families, or rather groups of three.* On the basis of the careful estimate of Mr. Atkinson, 14,000,000 of these must have been supported upon incomes of less than $400 (in my judgment less than $350), 700,000 on less than $1,000, and the other 300,000 on larger incomes. The average annual earnings of the nation during 25 years cannot have exceeded $7,500,000,000. Allowing 15% as savings, destruction, and cost of replacement, and adding to this the tax burdens, which must be paid out of savings, there would remain, as the sum expended in the support of the people, an average of less than $5,100,000,000 per annum. On this the burden of indirect taxation has averaged 25%. We are now prepared to calculate the effect.

* The actual number of real families was much less. It was under 10,000,000 in 18S0, averaging 5 persons each.

Supposing them exempt from taxes, still it would be unreasonable to expect the mass of the laborers to support their groups of three on less than $300 a year. Their burden of taxation, then, has averaged 25% on this, or $75 a year. Contrast with this the case of men who enjoyed an income of $1,000,000, which a fortune of $15,000,000 would on an average easily have produced in simple interest during this period. Allow them $100,000 each, for a modest living; on which their tax would be $25,000 each. From what fund would these taxes be paid? Obviously, from what would have been saved, but for taxation, not from what was spent. This fund, in the case of the masses, would amount to $100 each; tax, $75. In the case of the great millionaires, $900,000; tax, $25,000. Tax on the property of the very rich, less than 3%. Tax on the property of the masses, more than 75%.

What would be the result, at the end of a year, on these two classes? Assume only 200 such very wealthy men; yet their savings would be, under such taxation, $175,000,000. Assume only 600 more, with incomes of $500,000 each, spending $50,000, and taxed therefore $12,500; their net savings would be $437,500 each, or $262,500,000 in all. Thus 800 rich men would save $437,500,000. The savings of the 14,000,000 laborers could not exceed $25 each, or $350,000,000. But, if taxes could be dispensed with, the savings of the millions of poor men would have reached $1,400,000,000, while those of the 800 rich would not have exceeded $450,000,000.

Here is a mathematical demonstration that the mere fact of indirect taxation is sufficient to strip the poor of three-fourths of their natural savings, and to concentrate a majority of the wealth of the community in the hands of an infinitesimally small part of its number.

What, then, is the remedy proposed by the wild fanatic whose blunders we are considering? It is threefold.

First, the total abolition of indirect taxation.

Secondly, the substitution of a single tax on ground rent, the only sufficient form of strictly direct taxation which has ever been invented.

Thirdly, the gradual increase of this direct tax, if necessary to that end, to an amount sufficient to absorb ground rents. This is all.

The third branch of this proposition is the only one which has brought the penalties of everlasting damnation upon Mr. George's head, from the hand of Dr. Van Dyke. But Prof. Harris and Mr. Atkinson are sure that they have saved his soul, at the expense of his arithmetic, by demonstrating that rent is a very insignificant item, which would not suffice to meet the present necessary taxes. Assuming, for the moment, that Mr. George's arithmetical critics have delivered his soul from Sheol, let us try to rescue his body from the lunatic asylum.

Every form of tax upon personal property or improvements upon land, whether in the form of a tariff, an excise, a license, or a so-called "direct tax" upon their value, is, in the inherent nature of things, an indirect tax. It is and always must be shifted from the original tax-payer to the final consumer. In many individual cases the original tax-payer is unable thus to shift the tax; but in that event he is crippled in business, and, if the difficulty is permanent, he is ruined and driven out of business, to give place to a shrewder man, who makes the customer pay the tax in the end, with a bigger profit than would have contented the weaker man.

There are no direct taxes worth discussing, except the income tax, the succession tax, and the tax on land, valued without reference to its improvements. The income tax opens the door to innumerable frauds, and puts a premium upon perjury and corruption. If adopted in this country as the sole method of taxation, it will open the way to such plunder of the honest rich as will make them sigh for Henry George and his tax on rent. Poor folk and rascals will escape from all taxation whatever. The succession tax will fall exclusively upon the rich. If made high enough to support the cost of all government, it will fail, because it will be evaded. There remains only the tax on land values, or the natural rent of land, irrespective of improvements.

This tax is absolutely direct. It cannot be evaded. It cannot be shifted by the original tax-payer. That is an axiom of economic science. If it were not so, there would not be a particle of the clamor which is raised against it. The thunders of the pulpit would have slept forever, if the land-owner could make poor folk pay his land tax, with a little profit. The adoption of this tax would therefore put an end to all the unnatural impoverishment of the poor and enrichment of the rich, which take place under the present system. It would amount to a total abolition of taxation, as to that vast majority of the poor who own no land. Whereas now they pay both rent and taxes, then they would pay rent alone. This simple fact is a complete answer to the inquiry: "How are the masses to get the benefit of taxing rent?" As to such of the poor as own land, they would be relieved from the taxes which they now pay on personal property and improvements, that is, from more tax than would be added to their land tax. For we need reckon none among the poor who own more than $3,000 worth of land clear, that being more than the average value of improved farms; and those who own less than $6,000 worth of improved real estate are now paying more taxes indirectly than they could ever be required to pay under the single-tax system.

Let us briefly consider "Henry George's Mistake about Land," as set forth by Prof. W. T. Harris, in the Forum for July, 1887. That "mistake" lies in his assumption that ground rent would be sufficient to defray all the expenses of government, national, State, and local. Prof. Harris, finding that the official assessment of real estate in this country, in 1880, was about $13,000,000,000, and estimating that this was two-thirds of the market value, and the value of the land alone about one-half of the whole, or somewhat less than $10,000,000,000, calculates the ground rent at 4% on this sum, or $400,000,000 per annum; which of course is wholly insufficient to meet the taxes of $700,000,000 levied in 1880. He then refers to Great Britain and Ireland, where, he says, land forms only one-fifth of the total wealth, with an annual rental of £65,442,000. As British taxes altogether amount to about £118,500,000, it is clear that, if this estimate is correct, the single tax would not suffice to meet British taxes.

Taking first the case of the United States, the census report of 1880 shows conclusively that assessments are worthless, as a means of estimating real values. They vary from 10% to 70% of the true value of real estate; and no average can be estimated from them. The census of 1880, upon which Prof. Harris relies to show the proportion of land to the aggregate wealth, and which he must not therefore desert for local assessment tables, contains items of real estate, including all privileges over land, aggregating over $28,000,000,000. Adopting the rule of division between land and improvements propounded by him, the lowest estimate of pure land values for 1880 would be between $15,000,000,000 and $16,000,000,000. There is no estimate whatever of wild lands belonging to private individuals, unconnected with farms, the value of which could hardly have been less than $2,000,000,000; but of this we will take no notice. The rental of 4% for 1880, upon which Prof. Harris bases his calculation, is utterly absurd. Strictly first-class mortgages could not be placed at less than 5% in the city of New York in 1880; and such mortgages averaged, the country over, nearer 7% than 6%. It is impossible that the ownership of land, which is no better than a second mortgage, should not, on the average, produce a rate of interest higher than a first mortgage. The lowest rate of interest to be allowed on the value of land would therefore be 6.5%. But to this must be added the amount of taxation which actually fell upon land values in 1880. This could not have been less than 0.5%. Such taxes, being paid by landlords and not by tenants, necessarily depreciate the market value of the land; and this amount should be either added to the rent, or deducted from the amount expected to fall upon lands in consequence of the adoption of the single tax, since this falls upon it already.

It follows that the ground rent of the United States, in 1880, was considerably over $1,000,000,000. The taxes for that year were about $700,000,000. But of this, $100,000,000 was levied only for the purpose of piling up a surplus. The necessary taxation was only $600,000,000; and the land-owners of the United States would have been able to pay all taxes and yet retain a very large surplus. The value of land in the United States is now not less than $20,000,000,000; but the rate of interest is lower, and ground rent has not increased in equal proportion to nominal values.

Turning to Great Britain, the mistakes of Prof. Harris can be readily shown to be vastly greater than any mistakes of Henry George. His fundamental errors are three.

He mistakes the rent of agricultural lands alone for the whole rent of the United Kingdom;

he mistakes the valuation of "houses" for that of structures alone, without the lots beneath them; and

he assumes that railways are not built upon land.

The following are the official figures for 1884, taken from the 28th British Inland Revenue Report; to which we append a very low estimate of the proportion of mixed land values which should be charged to ground rents alone:

British Pure Annual Land Values, 1884.

Lands, returned as such

£65,442,000

Manors, tithes, fines, etc.

853,000

Fishing and shooting rights

572,000

Markets and tolls

607,000

£67,474,000

British Mixed Annual Land Values, 1884.

Houses and lots

£127,050,000

Canals, water-works, mines, gas, iron, etc

22,381,000

Railways

33,050,000

£182,481,000

One-half of these values as land

£91,241,000

Total land values

£158,715,000

Now the whole net amount of British taxes is £118,500,000. But of this, over £27,500,000 is already assessed upon pure land values. The adoption of the single tax would therefore increase the burden upon land only by £91,000,000. The net rental value of land being over £158,000,000, it follows that the land-owners of Great Britain and Ireland could pay all national and local taxes, and still retain for their own benefit the comfortable margin of £67,000,000. Prof. Harris will do well to study his statistics carefully before he again undertakes to exhibit "the mistakes of Henry George." *

*Prof. Harris quotes Mulhall, as proof that "land" in the United Kingdom is worth only £1,737,000,000, in a total of £8,720,000,000, or one-fifth of the whole. But Mulhall distinctly shows that this amount includes only agricultural land ("Dictionary of Statistics," 5); and he very properly recognizes houses and railways as real estate, stating (p. 280) that 62%, of British wealth consists of real estate. It is notorious that the mere land occupied by British railways was enormously costly, and is now worth far more than it cost. Land alone, on Mulhall's showing, forms one-third of British values, just as it does in America.

Mr. Gunton, in the Forum for March, 1887, had preceded Prof. Harris in the same field and with about equal accuracy. He calls the entire rental value of real estate in the United Kingdom, including, of course, improvements, £131,468,000. The correct official figure (including £43,000,000 taxes, paid by occupiers) was, in 1884, almost exactly £293,000,000; and the real value is far greater. Instead of being only 11% of the gross produce, as claimed by Mr. Gunton, it is fully 25%. It is not worth while to follow either Mr. Gunton's figures or arguments any further.

I regret that the space allotted for this article will not allow an examination of Mr. Edward Atkinson's calculations on the same general point. His statistics are far more accurate than those of Messrs. Harris and Gunton. Accepting all his statistics as absolutely accurate, I have shown in another place, by his own figures, that two-thirds of the ground rents of Boston would provide for all local, State, and national taxes on Boston.

The single tax, therefore, would be a real, effective, and adequate remedy for the present unjust intervention of the state in favor of the rich and against the poor.

There still remains the question: "Is the remedy just?" Many of Mr. George's critics (notably Mr. Gunton) are debarred from raising this question, since they assert the absolute right of the state to deal with all property as may be deemed expedient. But the majority of them are better represented by Dr. Van Dyke, who thinks the proposition of Mr. George "thoroughly unrighteous." So far as we can make out, this is because the state has in the past allowed private individuals to appropriate land and its rent to their own use, and is therefore estopped from taking away that rent by taxation. But land has always been taxed. In most of our large cities it is now theoretically taxed at least 2% on its value; often 3%. Why should a tax of 2% or 3% be just and righteous, but a tax of 4%, 5%, or 6% incur penalties of everlasting damnation? Is it because land is especially singled out for taxation? Then is there not at least equal wickedness on the part of Congress, which for half a century singled out the business of importation as the only subject of taxation, and still taxes it ten times as heavily as anything else? Does the wickedness consist in taxing land up to its full value? Then is it not equally wicked to tax the poor man's window glass 100% upon its value? Does the wickedness consist in imposing a tax for the purpose of accomplishing some ulterior result? How about our whole tariff legislation, which is avowedly maintained for an ulterior purpose? Is it wicked to tax private property out of existence? How about the tax on bank notes, which was levied for the express purpose of destroying State banks? How about the tax on oleomargarine? Is it wicked to tax property out of existence, without giving compensation? Why do not those who urge this plea petition Congress for compensation for those whose wealth has been destroyed and whose occupation has been taken away by taxes avowedly levied for that purpose? Not one of these critics has ever suggested such a petition; not one of them would sign such a petition; and not one of the many thousands who have suffered from such tax laws ever thought of presenting such a petition.

Judged by any standard which has ever been applied to public affairs, even by clergymen, the proposition of a single tax on land values is perfectly reasonable, moral, and honorable. As to the amount of such a tax, that is a question to be decided by a wise expediency. There is not the slightest moral obligation on the part of the state to make the tax small, or to leave any margin to land-owners, so long as no more is taken than is needed for the honest use of the state.

It is not necessary to follow any further the proposition of Mr. George to increase taxation up to a point which would practically absorb all ground rent. Every one of the critics who has discussed the point at all, has committed himself to the theory that no such artificial increase of taxation would be necessary to absorb rent. Moreover, it is not a practical question at present, and will not be for a very long time to come, if ever. Taxation rises quite fast enough, without artificial efforts to increase it. In 40 years, in Ohio, population increased 100%, assessed wealth 1,000%, and taxation 1,360%. It is sufficient for the present to show that the actual remedy proposed by Henry George for the evils of our present social condition, the only practical measure which he asks to have adopted today, is a real remedy, an adequate remedy, and a just remedy. The criticisms of his adversaries have been directed to mere side issues, to his minor arguments, to his intellectual processes, to his illustrations, to anything except the real pith of the matter in hand. Not one of them has really wrestled with the problem; not one of them (except Mr. Atkinson) has been even approximately correct in his statistics; not one of them has failed to commit mistakes in his reasoning and his calculations far more serious than any which can be fastened upon Henry George.

November 22, 2010

I stumbled across this document in a little book which runs to 24 pages, from 1887. Those with an interest in Alabama history, particularly as it relates to taxation, might find that it helps explain how the 1903 constitution came about -- whose interests it sought to protect. Consider it, too, in light of our current economic situation -- too few jobs, lots of income and wealth concentration; not enough credit available to afford housing or commercial sites. These problems can be solved, but not in the ways we've already tried.

The Case Plainly Stated By H. F. RING

PREFATORY NOTE -- This address originally was delivered to the United Labor Organization of Houston, Texas, in 1887. It appeared in full the next morning in the Houston Daily Post, and afterwards in The Standard, published at that time in New York by Henry George. Mr. George then issued it in tract form, giving it the name of "The Case Plainly Stated." Many editions of it have since been published from time to time in this country and in Europe and Australia, and it is generally regarded as one of the clearest brief statements extant of the philosophy of land value taxation as taught by Henry George in his famous "Progress and Poverty."

MR. CHAIRMAN:— The land question is simply a question as to how the use of the bounties of nature shall be best regulated and controlled. By bounties of nature I mean the coal beds, the mineral deposits, the land — all those natural elements which were not created by human industry, but which Nature has freely and abundantly provided for the use and enjoyment of all the children of men; and I propose to show how the right of capital and. labor to use these natural elements should be regulated by the government*, so as most to conduce to the happiness and well-being of mankind.

* The word "government" as used in this presentation of the Single Tax refers to the tax levying power as vested, not alone in the federal, but also and even primarily in the state, county, and municipal governments. It is probable that a complete application of the Single Tax will be reached through its gradual adoption at first in cities, counties and states, before it is substituted for tariff and internal revenue taxation.

I am a Single Taxer, and a discussion of the land question by me can be nothing more than a mere attempt to expound the teachings of that great master of the subject, Henry George.

George, at the outset, calls attention to the marvelous improvements in the arts and sciences, the discoveries, inventions, and labor-saving machines which, within the past 100 years, have so immensely increased the productive powers of the human race. Is it not a moderate estimate to assume that on an average the labor of one man today, with all these labor-saving inventions, will produce as much of the comforts and luxuries of life as the labors of four men would a hundred years ago? And does it not follow that the average workman of today creates, by each day's labor, four times as much wealth as the average workman did a hundred years ago? George teaches that if the workman of today, on an average, creates four times as much wealth as the workman of a hundred years ago, then the services of this workman of today are four times as valuable to society; then why should not his wages of right be four times as great? Why should he not be four times as independent? Why should it not be four times as easy for him to make a living and support his family in comfort and decency?

Will any one presume to assert that this is in fact the case? On the contrary, is it not just about as hard for the poor man to make a living today as it ever was? Does he not dread the loss of a position today just as much as he ever did? George asserts that labor-saving machinery really ought to lessen the burdens of labor, to make it easier for the laborer to live, and in fact, to lighten his toil. But alas, from some apparently mysterious cause, — a cause which many comfortably well-to-do people insist is one of the unfathomable mysteries of Divine Providence, — what George claims should rightly result from inventions does not result from them. And still we are all the time making new discoveries, and year by year increasing, by means of new inventions, the productive powers of working men; yet, with the increase of population, the lot of those who produce all this wealth seems to be becoming more precarious, less independent and more and more wretched.

Who denies that under the present social system, wages tend to fall irresistibly to the point at which the wage-workers can barely subsist? This is called the iron law of wages, and all the strikes conceivable can only temporarily, and but fitfully, arrest this steady tendency. For so long as unemployed men compete for employment against the employed, wages cannot permanently advance. The worker may create quadruple the wealth, but he is not permitted to retain any more of it as his share.

WHO GETS THE WEALTH?

Now, where does this wealth go — this wealth which we now produce so much more easily and in such vastly greater quantities than ever before? What becomes of it? Who gets it? Why is it that in this age of wealth-producing and labor-saving machinery, poverty as abject and hideous as ever before seen in the history of the world abounds and increases in our midst? What is the cause of the so-called iron law of wages? Henry George has discovered it. He has pointed it out, and he has shown us the remedy. He has demonstrated beyond a doubt or question that it does not result as a fatal necessity from the nature of things, but that it is a result of violation of natural law, of a refusal on the part of society to recognize the inalienable right of every citizen of access to the bounties of nature within the territory of his country on equal terms with every other citizen of that country.

Let me now give you a short lesson in the elements of this new political economy.

Three factors enter into the creation of every conceivable kind of wealth. By wealth we mean any material thing produced by human industry which gratifies human desires. These factors are land, labor and capital. Wealth in a civilized community is produced only by means of a union or partnership between land, labor and capital. Labor does the work, capital loans the tools, and land furnishes the natural elements on which, and out of which all material things resulting from human industry are created. In speaking of land in the new political economy we never include improvements or anything which is the result of human toil. We simply mean the opportunities which land and the elements within it afford for the employment of capital and labor — we mean the raw elements as they lie on or in the bosom of the eartli, untouched by the hand of man.

Now, as before remarked, the product of land, labor and capital is wealth, and after it is produced, it is divided among these factors entering into its composition. A certain portion of it, called rent, goes to land, either directly in the form of rent or in the form of interest on the selling price of the land or of the coal bed, or whatever it is; another portion of it, called profit or interest, goes to capital for the use of tools which capital has furnished, and the balance left, after land has been paid rent and capital has been paid interest or profits, goes to labor as wages for the work which labor has done, including the labor of superintendence.

MEANING OF RENT.

Now what does rent signify as used here? Rent is the price paid for the privilege of access to the raw material — for the mere privilege of getting hold of something not created by man, on which and out of which labor and capital can produce wealth. This rent may be paid periodically, or may be paid in a lump in the form of purchase money. In either case the result will be the same. Is it not clear that in the division of wealth after it has been produced by this partnership between land, labor and capital, the more land gets for rent the less there will be left for capital and labor? Is it not quite as plain as A B C that the more it costs capital and labor to get hold of these natural elements, the coal beds, the mines, the water fronts, the land — the gifts of nature which a kind providence has provided for the equal use and enjoyment of all — the less there will be for labor and capital to divide between them?

In the new political economy we must never confuse land with capital. One is never the synonym of the other. Land, as before stated, is simply the natural opportunity, exclusive of improvements or anything done to it by man. Capital is something that has been made by man, like a machine for instance, which is useful in the production of wealth. It is wealth used to produce more wealth.

LABOR AND CAPITAL PARTNERS.

But someone asks: Suppose the capitalist who is using the coal bed or using this natural opportunity, whatever it may be, is also owner of it. Where then does your partnership between land, labor and capital come in? We answer just the same as before. A sum equal to the interest on the market value of the coal bed (independent of the machinery, excavation work, etc.) is in such cases a factor of rent. The owner, in addition to profit or interest on his capital, as before defined, must also take from the wealth produced a sum equal, approximately, to interest on the market value of the coal land, otherwise he would sell out and quit. It is evident that the more money the owner is obliged to invest in purchasing the coal bed, for instance, the greater must be the sum which he takes out of the wealth produced to cover interest on that investment, and hence such interest money is simply rent paid for the use of a natural element, for the privilege of access to one of the bounties of nature. Therefore, is it not equally plain in this case that the more paid for this privilege of use, the less will remain out of which labor can get wages?

A few years ago we read in the newspapers of a great boom in the vicinity of Birmingham, Alabama. We were exultingly told that the lands containing coal beds and mineral deposits in northern Alabama had gone up in value from $75,000 to $50,000,000 in the space of six years. What does this signify? It means that when capital and labor shall attempt to utilize these coal beds and mineral deposits, when capital and labor shall unite together, the one to furnish the tools, the other the labor, with which to produce wealth out of this raw material, then will a set of landlords step forward and block the enterprise with a demand for $50,000,000 for the mere right of access to these free gifts of nature, or in lieu of it the payment of $3,000,000 a year as tribute money, that being the interest of $50,000,000 at six per cent.

There lie the coal beds and mineral deposits untouched by man, fresh from the hands of the Creator, intended by Him, if He is the just, benevolent Being whom we have been taught to worship, for the equal use and enjoyment of all His children, and yet our laws say that capital and labor must pay a few forestallers $3,000,000 a year for the privilege of applying the hand of industry to these elements.

And after this blackmail has been paid, how much will there be left for the wages of labor? The answer is, just as little as labor can ordinarily subsist upon. Why? Because this monopolization of the gifts of nature going on, not only in northern Alabama, but everywhere else, enables capital to drive a hard bargain with labor. For this reason, and this alone, they can't deal with each other on equal vantage grounds. Suppose labor objects and says to capital: "I'll not accept the pittance you offer." Capital replies: "All right, go elsewhere." And so labor starts out to get work for himself, and what does he find? Here he is, living in a country capable of raising food for ten times its present population, and he finds four-fifths of the land untilled or but partially cultivated. He finds four-fifths of the coal beds and mineral deposits unused. He finds vacant land and unused lots on every side. He goes to New York City even and he finds there within its corporate limits almost one-third the area of that city vacant, unoccupied, and unused, although there are miles and miles of tenement houses, in which men and women and innocent children are packed and crowded like maggots, as though there wasn't ample room in the city for the comfortable housing of every human being in it. He finds unused natural elements all around him wherever he goes, sufficient to give employment and support in abundance to tens of millions of happy families.

But now suppose labor attempts to make use of any of these unused natural opportunities? Suppose he concludes to go to work for himself upon a piece of vacant land in the suburbs of a city, for instance, where labor could be applied to the greatest advantage. What happens? An individual comes along and waves a title deed, and orders him off the premises. He finds that all these unused natural opportunities are owned by individuals and claimed as private property. He finds himself frustrated at every point. He finds that he can't go to work anywhere without paying blackmail to the owner of some natural element for the mere privilege of working and so he strikes back to northern Alabama and takes off his hat to Capital and bows very low and says: 'Please, sir, give me a bare living and I will be your slave."

And that is about all that he does get, and that is all he ever will get under the present system of land ownership, though you may strike and boycott and potter about graduated land taxes, graduated income taxes, and graduated nonsense until doomsday.

THE GREAT PARASITE.

With advancing population the greater becomes the demand for natural opportunities and the higher the prices which can be extorted for the privilege of using them. As population increases, the town lots, the coal beds, the mineral deposits, the water fronts, the land, go up in value, and so goes up also the amount of tribute money which labor must pay for access to them, for the privilege of employment. The more of the products of industry which go for the payment of this constantly increasing tribute, the less and less will grow the share allowed the laborer and the more dependent and the more wretched will his lot become.

Here in Houston today, suppose Enterprise has $50,000 to invest in the paper mill business, a sum barely sufficient to put up the building, buy the machinery and carry stock. He finds a beautiful site for his mill on the banks of the bayou. It is a vacant lot. The hand of man has never been applied to it, and it stands there now just as it stood when the Indian roamed over the site of this city. The owner of that block, however, thinks he can make Enterprise pay him $20,000 for the privilege of giving employment to labor on this natural opportunity — this piece of ground. That is the price, and if he can't get it today he will get it when the city grows a little larger. But Enterprise says to him: "I have only $50,000 capital, all of which I shall need in my business." The land owner answers it is not his lookout, and so Enterprise turns away checkened and baffled, and the mill is not built.

CAUSE OF DULL TIMES.

And so it is everywhere. Wherever we find a portion of the vacant surface of the earth which could be utilized by capital and labor, and which affords an opportunity for human toil and enterprise, there we find a human vampire with a paper title in his hand warning off labor; and that vampire must always be placated by the payment of blackmail before the wheels of industry can begin to turn.

Need we wonder that these wheels turn slowly, and that they are always getting out of gear; that we are always talking about dull times; that men are always out of employment and always hunting for work, regarding it as a favor even to be allowed to work; that we are all the time growing too much cotton, when millions of human beings have only one shirt to their names; that we are producing too much food, when half the population of the world is insufficiently fed; that carpenters are out of work, when half the people are not comfortably housed; shoemakers wanting work and millions needing shoes? How could it be otherwise, when labor is compelled to beg for work in the midst of limitless unused opportunities for work, on which opportunities, however, sit these human vampires, these dogs in the manger, waving labor back with their paper title deeds?

AN ILLUSTRATION.

Now let us go back for a moment to that partnership between land, labor and capital. For illustration, suppose the wealth produced by the partnership to be created by the application of capital and labor to those coal beds and mineral deposits in northern Alabama, valued, as we have seen, at $50,000,000. In the division of wealth produced we have shown how, say six percent of this $50,000,000, or $3,000,000, must go to land as rent. Or, in other words, $3,000,000 a year must be paid to land owners directly as rent or interest on purchase money for the bare privilege of utilizing these gifts of nature. Now, in the division of wealth produced, why is labor entitled to any portion of it? Clearly because labor's industry has contributed to its creation. Why is capital entitled to any part of it? Because capital has furnished labor with tools with which to develop the mineral deposits. The capitalist who owns the tools can trace his title back to the creator of them, to some individual or set of individuals whose industry produced them and from whom he purchased or inherited them. The title, then, of both labor and capital to a portion of the wealth produced from these mineral deposits originates in human industry, and it is a sacred title. Now then, why should the land owner get any portion of this wealth, to produce which capital has supplied the tools and labor has done the work? This owner claims the right of making capital and labor pay him interest on $50,000,000, or $3,000,000 a year, for the mere privilege of access to this raw coal and raw ore. Ought we not to scrutinize most carefully his right to extort this immense tribute? And if he can show no natural and moral right to claim it, does not society countenance the robbery of labor in permitting him to do so? Where does his title originate?

We find that six or seven years ago he paid someone who claimed to own the land in which these mineral deposits are found $750,000 for the raw natural element for which he now demands $50,000,000. Was this additional value of $49,250,000 in six years produced by his industry? Was it produced by the industry of any previous owner of these natural elements? Did it cost $49,250,000 to discover these mineral deposits? We trace back his title a little further, and we find that perhaps a hundred years ago it originated in a grant to John Jones from the government — that is to say, the people who inhabited this country a hundred years ago and who constituted the government said: "We will divide the land and we will give John Jones this particular tract for his private property."

But did these people create that land and the coal and iron in it? Can it be shown that they had any better right to it from the Almighty Creator than the people of this generation have? Was the earth intended by the Heavenly Father for one generation to dispose of forever, or as an abiding place for all generations? Was Thomas Jefferson right or wrong when he wrote: "The earth belongs in usufruct to the living; the dead have no right or power over it?" By what authority could the people living here a hundred years ago, long since dead and gone, confer upon John Jones, also dead and gone, a right which would enable John Smith today, by tracing a paper chain of titles from him, to extort from capital and labor a tribute of $3,000,000 a year for the bare privilege of getting to that coal and iron and making it useful to mankind?

Who dares to blaspheme the name of the Almighty Ruler of the universe by saying that the coal and iron were not intended by Him for the equal use and the enjoyment of all His children — the humblest babe born today in a garret equally with a child of the proudest duke who ever lived?

MAN IS A LAND ANIMAL.

Is not man a land animal? Can he live without land? Can he any more rightfully be deprived of access to land than he can rightfully be deprived of life itself? Can he any more rightfully be compelled to yield up to a forestaller, a mere owner of land, a portion of the fruit of his industry for the privilege of getting hold of the raw material elements than he can rightfully be compelled as a slave to yield up to a master a portion of the fruits of his industry? To compel him to do so is as much a robbery of labor in one case as in the other. Why then is not the humblest babe that God sends into this world naturally and by inalienable right entitled to access to land on equal terms with all his fellow human beings?

ORIGIN OF PROPERTY RIGHT.

Mind, when we say access to land we do not include access to improvements on land, or access to anything produced by human industry, a title to which can be shown originating in human toil; we simply mean access upon equal terms to the free bounties of nature as they lie upon the kind bosom of mother earth, untouched and undisturbed by the hand of man. What I produce by my industry is mine. What I obtain by exchanging the products of my industry for the products of another's industry is mine. What my father or my grandfather produced by his industry was his, and if he has given it to me it is mine.

In all these cases human industry is the origin of property right, and property rights originating in human industry must be held sacred, else there would be no incentive to human effort. Do not the values produced by the individual belong to the individual producing them? Do not the values produced by the community belong to the community producing them? Is there anything wrong, immoral or communistic in this ideal? And yet this is the sum and substance of the Henry George philosophy.

Take the case of the vacant block on the bank of the bayou which Enterprise wanted for a paper mill and could not get. Fifty years ago it was worthless. Now labor must pay a tribute of over $20,000 to the so-called owner for the privilege of using it. Whose industry has put $20,000 of value on that piece of vacant ground? Not the industry of the present owner, nor the industry of any former owner, because no man has ever done a stroke of work upon it. That value of $20,000 has been placed upon the land by the common energy and enterprise of the entire community. Since the community has produced that land value why does it not belong to the community? Why has not the community the same rights to the value it creates as the individual has to the values which he individually creates?

THE REMEDY.

How shall this derangement of the wheels of industry, this blackmail upon enterprise, this robbery of labor, this eager and fatal competition among laborers for employment, this slavish fear of the loss of a situation in the midst of abundant unused opportunities for employment — how shall this curse which our present land system has fastened upon the productive industry of the country, be removed? Simply by doing justice; by being honest; by recognizing in our laws one of the inalienable rights of man; by recognizing in every human being, in every generation, the present as well as the past, an inalienable right of access to the bounties of nature on equal terms with every other human being.

How shall this right of access on equal terms be secured? Simply by making every individual who claims a right to the exclusive possession of a tract of land pay in the form of a tax approximately what the use of that tract of land is worth, exclusive of all improvements on it or anything done to it by the hand of man, and by abolishing every other form of taxation. Take the rent of land for public use instead of taxes.

WILL SIMPLIFY GOVERNMENT.

Some one asks: "Will not this proposed change vastly increase the functions of government and immensely add to the number of government employees?" I reply no. On the contrary, at least two-thirds of the present army of revenue collectors and tax gatherers will be dispensed with, and the remaining one-third will collect this single tax on land values at one-third the expense now incurred in the collection of national, state, county, and municipal taxes.

Another inquirer asks: "Will not the new system offer abundant opportunities for corruption and partiality in fixing the amount of this tax annually to be paid for the exclusive use of a piece of land? And how do you propose the amount of the tax shall be determined?" It will be determined by the same law of demand and supply which now determines the amount of tax under the present system. The single tax will be fixed by the same machinery of an assessor and a board of equalization which fixes it now. For instance, under this system a piece of property on Main street rents for $5,000 a year. Interest at the prevailing rate on the building alone, added to the annual cost of insurance, repairs and caretaking, and a sum sufficient to provide a sinking fund for renewals amounted to, say $3,000 a year. The landlord is then collecting the difference between $3,000 and $5,000, or $3,000 for the use of this naked earth. That is to say, he is collecting $2,000 a year for the use of something never created by man, to which all are by natural right equally entitled, and which owes its rental value of $2,000 a year exclusively to the common enterprise and energy of the entire community.

This is the sum which, under Henry George's system, would be turned over to the government in the form of a tax for the common benefit of the community who collectively have made the use of this land worth $2,000 a year.

Here an interested friend anxiously inquires: "But if the landlord has to pay this tax of $2,000 a year for the use of the land, will he not take it out of the tenant by raising his rent to $7,000?" No, for the landlord's charges now all he can compel the tenant to pay. Suppose he tries to. Suppose he says to his tenant: "You must now pay me $7,000 a year." What happens? Just what happens every day now. If the tenant can do no better he pays the increase. But now, mark you, when the landlord goes to pay his tax what happens then? Why the board of equalization says to him, you have received $7,000 a year rent for the use of improvements worth only $3,000 a year. You are therefore collecting $4,000 a year instead of $2,000 for the use of the naked lot, and you will therefore pay the city or state $4,000 a year for the privilege of the exclusive use of the ground instead of $2,000 a year as heretofore. Now what has the landlord made by jumping up the rent? Nothing. What would be made by thus jumping up the rents under the present system? Everything. Under which system would landlords be more apt to force up rents?

DETERMINING THE TAX.

Another way by which the board of equalization under the George system would determine the amount of tax to be paid for the privilege of the exclusive possession of a tract of land, and which would also compel landlords to collect from their tenants and turn over to the government in the form of a tax the full value of the use of the land, would be from observation of the prices which real estate brought in the market. But note, at this point some smart fellow jumps up — and he is likely enough to be a newspaper editor — and vehemently protests, saying: "Why, sir, the taxation of ground values plan does not propose to allow any exclusive ownership of land. It demands that the government own it all and rent it out or divide it up into 60,000,000 or 70,000,000 little bits, or do something of that kind with it, and here you are talking about lands being bought and sold under the Henry George system. Why, man alive, you don't know what that system is!"

Now, Mr. Editor, or Mr. Who-ever-you-are, let me say to you that in your ignorance, or in your indifference to the sufferings of your fellowmen, or in your desire to pander to the greed of monopoly, or to the timidity of capital, you may say what you please; you may misrepresent as much as you please for the purpose of bringing odium and contempt upon the cause; you may call it what you please — state ownership, state landlordism, ownership in common, communism, nihilism, anarchism or anything else; but the fact, nevertheless, remains that, under the just and righteous land system which we are trying to explain, the land will continue to be bought and sold under the same form of paper deeds, precisely as it is bought and sold today. It will continue in precisely the same way to pass to devisees by will and to heirs by law of descent and distribution. The right of control, of exclusive possession and dominion over a piece of land and of the free and exclusive enjoyment of all improvements on it, will in no way be abridged or disturbed. When you buy a lot on Main street today worth $10,000 with a building on it worth $10,000 more, your deed recites a consideration of $20,000. Now when you buy this same property under the George system, the only difference in the whole transaction will be that your deed for it — assuming that the price accords with the market value prevailing at the time of your purchase — will recite a consideration of only $10,000, and $10,000 is all that you will then pay for the property. You will pay nothing for the land. After you have bought the property you will pay yearly in the form of a tax to the government, approximately the full market value of the (yearly) use of it — which will amount to the annual rental value of the land, and as the man from whom you purchased had to pay the government the same annual rental value, you will consequently pay nothing, or approximately nothing*, to him for the land itself when you purchase the property. You thus save an investment of $10,000 in dirt; instead of such investment you will pay for the common benefit of the community, including yourself, what the privilege of the exclusive use of that spot of earth is worth — nothing more, nothing less — and that is simply what you ought to pay. The $10,000, which, under the present system, you are compelled to bury in a bit of earth, you will have left you with which to increase your business; and if you do increase your business with it, and add another story to your building, no tax gatherer will come around and impose an additional fine upon you for doing something with your money which gives employment to labor.

* There will, no doubt, be instances where the desire of an individual to get and retain possession of a certain piece of property, will cause him tooffer a bonus over and above the market value of the improvements.

NO PROPERTY IN LAND.

Thus, under the single tax system, land would be sold and would change hands as it does now, but it would only bring in the market approximately the value of the improvements on it. If land in any locality should get to selling for considerably more than the value of the improvements on it, this would be a certain indication that the parties using the natural elements in that neighborhood were not paying for the benefit of all the people what the use of the same was worth, and so a board of equalization would put the tax up. As population increases the value of the use of land increases, and with it, under the George system, the revenue from this tax on land values will increase, and thus the entire people who collectively produce this increasing value will get the benefit of the values collectively produced by them. As it is now, the increase in the value of land, which amounts to several billions annually in the United States, four-fifths of which is increase in the value of city and town lots and mineral deposits, goes to a comparatively small number of individuals who do no more to produce these values than any other members of the community.

TAXATION ABOLISHED.

Another doubter puts this objection: Under the George system you would make the owner of a lot on Main street, with an improvement on it worth $10,000, pay as much tax as the owner of a similar lot adjoining, having a building on it worth $50,000. What justice is there in that?

Let us see. Take away the improvements and these two lots are of the same value — that is to say, the value of the use of both lots for ordinary business purposes is the same. Suppose it is $300 a year. Now, the man with the $50,000 improvement collects from his tenant ten percent on his $50,000, or $5,000. He also collects $300, the value of the use of the lot, making in all $5,300. The man with the $10,000 improvement also collects ten percent upon the valuation of his improvement from his tenant, of $1,000. He, too, collects $300 in addition for the use of the lot, making in all $1,300. Now after both have paid the government $300 apiece for the privilege of the exclusive use of these lots, each will have left ten percent upon the capital invested, and why should one be entitled to any greater percent upon the capital invested than the other?

The fact is, that under this system there will be no such thing as taxes. Taxation, as we now understand it, will be abolished. The revenue derived by the government from requiring all who use a natural opportunity to pay into the common treasury what the use of that opportunity is worth, if it is worth anything at all, will be more than sufficient to enable the government to dispense with every species of taxation. As it is now, when you pay your taxes, you are simply robbed of a portion of the fruits of your industry, for which you do not get, directly, any equivalent. Under the proposed system, when you pay your single tax on land values you will get directly a full equivalent for every dollar paid. You will get the privilege of the exclusive use of a tract of land for what that privilege is worth.

ACCESS TO UNUSED LAND.

If this system were adopted what would become of the vacant lots and lands, the unused coal beds and mineral deposits, the unoccupied water fronts and water privileges over which human vampires now stand guard, retarding enterprise and driving off labor? They would become absolutely free. No one could afford to hold them and pay taxes on them. The vampires would turn them loose. Land speculators and land sharks, instead of trying to grow rich by forestalling labor and capital and thus preying like devouring beasts on their fellowmen, would turn their talents to better account. Wherever labor could find an unused lot or coal bed or mineral deposit or unused tract of land, there labor could go to work and employ itself without being required to invest a dollar in the purchase of a right of access to the natural element, without being compelled to first make terms with a dog in the manger claiming it as private property and holding it for speculative purposes.

If that vacant natural opportunity were situated near a center of population, or were of a character to bestow peculiar money-making advantages upon the persons using it, this advantage would create a demand for it, and this demand would regulate in the manner already pointed out the amount which labor and capital would pay for the use of it, in the form of a tax for the common benefit of all. If that vacant opportunity, for instance, were a tract of land four or five miles from this city, it would have few advantages to make the use of it at present peculiarly valuable. Why? Because there is so much vacant land of the same character near it, the use of which is equally valuable, that no one would give a bonus, as it were, for the use of that particular tract. Labor would, therefore, at first get the use of that land for nothing. It would have no taxable value at all until all the other vacant land similarly situated was put into use. Under this most just and equitable system the taxable values of land would be confined almost exclusively to the cities and towns and the coal and mineral deposits. Where people congregate, there land has value. In New York City alone, capital and labor today pay to a few thousand land owners, in ground rent alone, exclusive of rent paid on improvements, for the bare privilege of living and doing business, tribute money amounting to hundreds of millions annually, a sum almost equal to the expense of carrying on the government of the United States. It is in these great centers of trade and commerce that land has its greatest value; it is here that land values are mostly found and from these centers nine-tenths of the revenue of the government from this tax on land values would be derived.

FARMERS WOULD BE BENEFITED.

If the George plan were suddenly put in force today, not only would all farmers be relieved from direct and indirect taxation, not only would farmers participate in common with all others in the universal and uninterrupted prosperity which would result from removing the obstructions which needlessly hamper and clog enterprise, but probably three-fourths of the working farmers in this country would pay no land tax at all. Why? Because with so much vacant or but partially cultivated land as there is here today three-fourths of the farmers would have no taxable value at all; and all who are counting on the farmers of America being so foolish as not to see how they will be as much benefited by a just and righteous land system as any other class will certainly be disappointed.

EFFECT ON FARMS.

"Yes," says our farmer friend, "but you propose to confiscate the farmer's land." Let's see about that. You are a farmer owning say a hundred-acre farm, situated like a majority of farms, in a neighborhood where for every acre of land in cultivation there are two or more acres unimproved or but partially improved. Your farm is worth under the present system, say $2,000. A hundred acres of this unimproved land adjoining it of the same quality is held by some speculator at $500. Your tax on your hundred-acre farm is $10 a year, the speculator's tax on the hundred acres of land adjoining of equal value, exclusive of improvements, is $2.50 a year — one-fourth as much as yours. You give employment to labor on your land, and thereby add to the prosperity of the community. The speculator excludes labor from employment on his land, and thereby retards the prosperity of the community. Why should you be taxed any more for using your hundred-acre tract, and giving employment to labor on it, than the speculator is taxed for holding in idleness a tract of equal value and preventing labor from using it? Why should not the speculator pay at least as much tax for the privilege of excluding labor from his tract as you have to pay for the privilege of employing labor on yours? Have you hurt anyone by turning up the wild sod and building fences and houses and putting $1,500 worth of improvements on your land? If not, why should you be fined for it by having your taxes increased?

Where our plan is adopted you will have no taxes at all to pay until this vacant land around your farm is put into use. Until then no land value could attach to your farm, and the tax which, with increasing population, you would ultimately be required to pay, would seldom equal and rarely, if ever, exceed that which farmers now pay on the improvement valuation. Assuming that you spend say $600 a year on your family, then under the present system your taxes, direct and indirect, and the toll which the merchants take for collecting indirect taxes, amount to at least $100 a year. You may not know it, because an indirect tax always fools a fellow paying it. You will be relieved from all these taxes, but best of all, men who are now idle and who can't buy what you raise will all be at work, and not only that, but their wages will be high enough to pay good prices for what you raise. It is true that under the new system you could only sell your place for $1,500. Still, with this same $1,500 you could buy just as good a place from some one else. The purchasing power of your farm, when it comes to buying another farm, would not have been reduced. Do not your interests as producer or a laborer vastly exceed your interests as a land owner?

LANDLORDISM AND GOVERNMENT

Now, coming back to the elements of the new political economy, some one says: "What difference does it make to the workmen whether labor and capital pay this ground rent to the individual or to the government, since, according to your theory, it must be paid all the same?" In the first place, if it is paid to the individual none of it ever comes back to labor and capital unless value received is paid for it; so far as labor and capital are concerned, it might about as well be cast into the sea. But when it is paid to the government in the form of a tax on land values it does come back to labor and capital again in the form of relief from every species of taxation, direct and indirect.

Again, the amount that Enterprise would pay the government for the privilege of access to the natural elements would be less under the single tax than is now paid individuals for this privilege. Under the land value tax the prices could not be advanced by monopolization of these elements, as is being done now.

But best of all, and by far the most glorious result that will flow from the establishment of a just and righteous land system, is that it will enable the wealth creator to stand erect, presenting to capital an unterrified front.

Return for a moment to the coal beds of northern Alabama and imagine the Henry George system adopted. Labor now again objects to the terms offered by capital, and again capital tells him to go. And again labor goes forth hunting for work. But how different he finds the aspect of things. He finds the same unused natural elements, the same unused coal beds and mineral deposits, the vacant lots and lands, but he no longer finds a fellowman sitting upon every vacant opportunity for work and waving him off. They have vanished. They have gone to work themselves. He finds every unused opportunity for labor, wherever it may be, absolutely free. Not a dollar of capital need be invested in buying a natural opportunity, in paying for the privilege of work. When labor went forth hunting work before, he not only had to ask capital to pay for the tools, but also to pay, usually a greater sum, to some forestaller, in addition, as blackmail, for the privilege of access to a natural element.

This will all be changed. It won't take near as much capital to start enterprises as it did, or in other words, to give employment to labor. In fact, labor could then take even an axe and hoe and find plenty of vacant opportunities on which he could make a living without having to bury himself in a wilderness to do it. All this makes him feel independent and enables him to bargain with capital for employment on equal vantage grounds.

MONOPOLY IS PROFITABLE.

Some time since a large manufacturing firm in Massachusetts adopted the eight-hour system. After trying it a year they gave it up and went back to the ten-hour system. The general manager said they could only make five percent profit on their investments by requiring only eight hours' work, and that unless they could make a bigger percentage than that, they would not be bothered with the management of the business — they would put their money into town and city lots, because that species of property would certainly enhance in value as much as five percent annually, and that, too, without any trouble to the owner, and so it is everywhere. Now, is it not absurd to expect to reduce the rate of profits with which capital will be content below this steady percent of increase in the value of town and city lots, by any combination of labor, or by any legislation which falls short of restoring these land values to the people who collectively create them?

Suppose you have $10,000 today. The best and safest thing you can do with it is to invest it in town lots in or near some growing town. Ten years from today, unless the George theory becomes generally understood, the lots will be worth $20,000 and you will have drawn to yourself $10,000 worth of wealth for which you have given no equivalent. You will simply have robbed the labor of the country of $10,000. But now suppose ground values to be appropriated to the public use by taxation. What are you to do with your $10,000? You would not buy vacant lots now; there is no speculation in them. The tax which you would have to pay for the privilege of excluding capital and labor from the opportunities for employment which vacant lots afford, would be too heavy for you. In fact, you couldn't even loan on land alone, because land alone will have no selling value in the market. The result is, that unless you let your money lie idle and so lose interest on it, you will be compelled to invest it so as to give employment to labor. You must put it into buildings, into machinery, into manufactory stock, into farm implements, into some channel where it will be active and where it will afford employment to labor.

Not only must you do this with your capital, but every other capitalist must do the same with his capital. Capitalist thus must bid against capitalist, since capital can only increase by calling labor to its aid and giving it employment.

Under the present system the rich can grow richer without calling in the aid of labor, without giving employment to labor. They do so by buying space and monopolizing land.

Under the present system, as wealth accumulates, the wealthy seek to invest in land, to get control of natural elements, and get into a position from which to blackmail labor, thus becoming an obstacle in the way of the production of more wealth.

Under the better system, however, wealth could not thus be made to set up an obstacle to the creation of more wealth, or, in other words, to the employment of labor. It can then only obtain a profit by investing in lines of enterprise which give employment to labor.

Under which system will the demand for labor be greater? Under which will earnings be higher?

November 20, 2010

I had the pleasure of stumbling across a piece of writing from about 100 years ago. It is in one of quite a large number of books written by enthusiastic admirers of the ideas of Henry George, put online by Google Books. This is from a book by one James Love (written under a pseudonym). I've reformatted it a bit to make it easier to read here. It is a good summary of "Progress and Poverty," still the best book I know on political economy and economic justice -- why we suffer from wealth concentration, income concentration, poverty, sprawl, and a number of our other most serious social and environmental problems. Here's the excerpt; read it slowly and consider its implications!

This man, who I believe to be the completest in thought and language that the world has seen, and his book the most precious ever given by man to men, concludes

that the world (even more necessary to our existence than our own bodies are) is intended for all men of all generations, and not for some men alone.

That every human being born into the world has a natural right in it equal to that of every other human being born into it.

That as man by his nature seeks to gain his ends in the easiest way, some parts of the earth on which he can accomplish much become more desirable than other parts on which he can accomplish less.

That this varying desirability, causing competition for the use of certain lands, shows itself in "rent," which is thus a communal product, and as clearly belongs to communities as the remainder of the produced wealth belongs to the individual producers.

That it is as impolitic and unjust to take from the individual for the use of the community what has been produced by the individual as it is impolitic and unjust not to take for the use of all, or of the community, that which is produced in common by the community.

That, in short, "rent" is the natural, God-intended fund for general public use. And

that in denying this moral law of equal rights to land there is brought about a pitiful inequality of true wealth, and a sordid struggle for existence, destructive of human freedom and eventually bringing progress to a halt.

And that we are at last learning that in setting up "vested rights" — based whether on ancient force or ancient law — developed into modern custom — and denying this equality, we rob men and deny the truly sacred right of every man to the product of his labor; deny the sacred right of property in "wealth."

And that in treating private property in land as sacred (worse than treating property in man as sacred) "there never was a more degrading abasement of the human mind before a fetich."

But that, on the contrary, "by conforming our institutions to this divine law of justice we will bring about conditions in which human nature can develop its best;

will permit such enormous production of wealth as we can now hardly conceive;

will secure an equitable distribution;

will solve the labor problem and dispel the darkening clouds now gathering over the horizon of European civilization.

We will make undeserved poverty an unknown thing;

will check the soul-destroying greed of gain, and

will enable men to be at least as honest, as true, as considerate and highminded as they would like to be.

We will open to all, even the poorest, the comforts and refinements and opportunities of an advanced civilization; and

we will thus, so we reverently believe, clear the way for the coming of that kingdom of right and justice, and consequently of abundance and peace and happiness, for which the Master told his disciples to pray and work."*

* "The strength of ' Progress and Poverty' is not that it restated fundamental truths which others had before stated. It is that it related these truths to all other truths. That it shattered the elaborate structure that under the name of 'Political Economy' had been built up to hide them, and restoring what had, indeed, been a dismal science to its own proper symmetry, made it the science of hope and of faith." —Reply to charge of plagiarism.—Henry George.

November 07, 2010

Some people think that land rents are not a significant percentage of GNP, or, when they hear "land reform," think only about agriculture, probably in the context of Third World latifundia.

If you believe that land rents don't matter in a modern economy, I have a wonderful get-rich-quick scheme for you! And I won't charge you a cent for my brilliant idea, so listen up!

I was looking at the real estate ads in the Washington Post (October 2, 2010, p. F1), and I observed that for just $271,000, you can buy a four bedroom, three bath contemporary chalet in Basye/Bryce Resort, Virginia, with screened porch and hot tub. It looks pretty nice, it has trees in the yard, and it was built in 2005. I'm not sure just where Bryce Resort is, so it must not be too close to DC, or I'd know more.

Other houses are more expensive. There's a three bedroom townhome (what used to be called a row house) in Alexandria, less than a mile from the Huntingdon Metro, for $579,000, more than twice as much, $308,000 more. Alexandria is on the Potomac, across from Washington DC.

What else can you buy? There's a three bedroom townhouse in Alexandria, for $642,800. There's also a white house, described as a 1920's classic, with the number of bedrooms unspecified, but a yard and landscaping of its own, for $1,250,000, nearly a million dollars more than the chalet in Bryce Resort. It looks attractive, but it's not a huge mansion. When I was a child, say in 1975, I think you could have bought a house like that in my home town for under $50,000, $60,000 at most.

So how do you get rich quickly? You buy houses in Bryce Resort, of course, and sell them in Alexandria at a $300,000 markup! Even after the costs of cutting up houses and moving them on flatbed trucks, you should come out way ahead. Buying and selling one house a year should give you a middleclass income, and if you work faster than that, you'll soon be set to retire rich.

Can anyone consider the obvious flaw in this scheme, and not realize that land prices matter? Land prices in Alexandria must be at least $300,000 for the land under a decent townhouse, more for the land portion of a home with a nice yard. Annual land rents must be about $10,000 or more for modest lots, several times that for bigger ones. This is not a trivial percentage of homeowners' incomes, or of GNP.

As a 19th century Georgist put it, instead of paying rent to a landlord and tax to the state, why not pay rent to the state and no taxes?

Every week when I scan the NYT's "What You Get" column, which showcases three homes currently on the market in various parts of the country, I wonder why the column doesn't provide the answers to the important questions?

How far is each home from a vital job market?

What share of the children in the local school district graduate from high school? attend 4-year colleges? graduate from college?

What sort of public goods and services and cultural amenities does the community offer?

Must those who live there have a car for every working adult?

I think Nicholas Rosen nailed it when he quoted a 19th century Georgist: instead of paying rent to a landlord and tax to the state, why not pay rent to the state and no taxes?

October 15, 2010

I was happy to read this comment to Peter Orzag's recent column, which ends, "Senate Democrats and Republicans almost never come together anymore. This month, they should fight the dual deficits rather than each other. Let’s continue the tax cuts for two years but end them for good in 2013."

The comment comes from Frederick Singer, of Huntington Beach, CA, September 7th, 2010:

Extend the tax cuts for two more years, then introduce a new tax formula that is simple to define and easy to enforce and is both progressive and pro-growth.

Eighteenth century economist Henry George had an idea he called the Single Tax, also known as the Land Value Tax. Essentially, there would be no income or sales tax, only a tax on the value of land. Not to be confused with a "property" tax, the Single Tax would apply only to the land, not to any buildings or equipment.

Simple to define and enforce: The tax would be "x" percent of assessed land value, no exceptions. You can try to hide income but you can't hide land.

Progressive and pro-growth: Wealthy people are disproportionate owners of high priced real estate and would pay most of the taxes, but the marginal tax on both income and consumption would be ZERO. A win-win for liberals and conservatives.

The philosophy: Henry George believed that money you earn from own efforts, from your skills, profession or business belongs to you 100%. But the part of your wealth that comes from your ownership of land derives from the economic activity of the surrounding community ("location, location, location") and is therefore fair game for taxation to support that community. In other words, your own business may be doing lousy, but the land under your business may still be very valuable due to regional economic conditions - and you could close the business and profitably sell or rent the land to someone else. Money earned or wealth accumulated from land ownership is the true definition of "unearned" income.

Could the Single Tax raise sufficient revenue? If my math is right, taxing all the privately held land in America at an average of just ten cents per square foot (obviously, higher in some places, lower in others) would yield about six trillion dollars - which I believe is in the neighborhood of current total federal, state and local government spending.

Most importantly, the Single Tax would send the message that you make money by creating useful products and services, not wheeling and dealing in real estate.

10 cents per square foot per year would be an average of about $500 for a standard 50x100' lot. But some land is worth considerably less in annual rent, and some is worth significantly more. There are lots that size in major cities which sell for many, many millions of dollars, and farmland is worth considerably less than that average (except, perhaps, in a few wine-grape counties). Quick-and-dirty, the annual value of a $1 million lot is $50,000. The annual value of a $100,000 lot is $5,000.

Most of us own land worth considerably less than $100,000 (the major exceptions being homeowners in certain parts of California and near a few coastal cities), and ownership of those $1,000,000 and $5,000,000 sites is pretty well concentrated in high-income -- and, almost by definition, high net-worth folks. Such land is also owned by corporations and so-called "small businesses." The owners of such land would much prefer that your labor and mine, your buildings and mine -- and theirs, too -- your purchases and mine -- and theirs -- be taxed, rather than collecting the rental value of the land they call their own. They like the way the current set of privileges bring them returns they don't have to work to earn, and which their heirs will enjoy, too.

August 29, 2010

I came across a pamphlet published in 1949 by a foundation on whose board I sit, and while there are some things that I might emphasize differently 70 years later, I thought it worth sharing. It speaks to a category I've just added to the "cloud" at left: Natural Public Revenue.

Today we see some additional privileges which corporations (and individuals) are taking advantage of -- the privilege of polluting the world's finite supply of air and water beyond its carrying capacity and ability to heal itself; the privilege of claiming as their own the supply of various other natural resources: e.g., oil, natural gas, lithium, copper. The privatization by corporations of what ought to be revenue sources for common spending should not go unremarked. And trivializing monopoly, as I think the author does, seems odd in light of what we've seen in the intervening years.

THE FATES of America and Europe are inextricably one. A depression here could ruin us and would ruin Europe. We dread a depression; yet we have done nothing salient or radical to prevent it. The Soviet Politburo eagerly predicts and awaits it.

The basic reason why there are depressions and why prosperity is not normal, general, and constant is that we do not distinguish between TRIBUTE TO PRIVILEGE and RECOMPENSE TO SERVICE, and are indifferent to their diametrically opposite effects.

The fault is not in our political system, the freest and best yet devised. It is not in our industrial system which, based on service, saved the world from German domination and will continue to serve us well unless stifled by "Planned Economy," as planned economy has stifled industry elsewhere.

But when we study our taxation system we find a cancerous growth, developed in the last few years, that threatens to destroy all that makes America great, fostering privilege and hampering industry and service. We take for granted the principles underlying our present taxation system; yet adherence to those principles means national disaster.

The full breadth and importance of Chief Justice Marshall's statement that "The power to tax is the power to destroy" seems never to have been wholly grasped or emphatically enough expressed. Taxation destroys good things as well as bad. The power to tax is the power to control a destructive force and, when used, becomes equivalent to a fine. A fine represses, and a tax represses. Simple reasoning develops the fact that a tax is automatically and undeniably a fine. It is an arbitrary seizure of private earnings or acquirements, based on arbitrary opinion, and the fact that the money is used for public purposes does not justify its imposition.

But since money is required for public purposes, how else is it to be provided? The answer is simple: through earned public income.

We are all familiar with earned private income, earned through labor, service, or investment, but few have inquired as to whether there might be a true, just earned public income -- an income that we all, as the public, create and earn jointly as a common wealth just as the individual creates and earns his income as private wealth -- an income that can be measured by fact and not by opinion, forming the basis for, and fixing the limit of, responsible public budgeting -- A PUBLIC INCOME PUBLICLY EARNED AND TO PUBLICLY COLLECTED.

Those who have inquired have been answered by the Physiocrats, by Thomas Carlyle, by Patrick Dove, by Herbert Spencer, by John Stuart Mill, and, in full and complete analysis, by Henry George in his great book, Progress and Poverty. These men have shown that the public income is closely measured by, and reflected in, and therefore should logically, justly, and intelligently be, the rental value of the land.

The rental value of the land, which is the amount that individuals will pay for its exclusive use, if collected or "taxed" by the public, would provide and define the rightful earned income of the public, to which the budget should conform.

Land costs nothing in human effort or creativeness and gets its value only from the presence of people; so, land rental value might better be called location value; and since location value means land in a desirable place among people, land value and location value are really people value. The landlord's title to the land is a legally created privilege. It represents no contribution on his part but gives him an unearned tribute (and it is unearned even though it was bought with money that was earned). Solely by their presence the people create this value, and it is theirs. The people should collect it and nothing else. Arbitrary assessment might have to be resorted to in time of emergency, but, as it is now understood and imposed, taxation should be reserved as a regulative or repressive curb on acts counter to the public interest.

It sounds like quibbling to speak of abolishing taxes while advocating the public collection of land rent; and, since the assessor would define and impose it, and the tax collector would collect it, it does look like a tax on land. But it is not a tax on land. It is payment for the privilege of an advantageous location among people.

It is easy to "capitalize" such an amount. Figure the capital that would earn interest equal to the rent offered. The value of the land is thus set by the rent. Assess it at that value, tax it at the current interest rate, and the public would then collect the value it creates. Taxes would no longer raise the cost of living.

The public collection of land rental simply means a charge by the public for a choice location in the midst of the public. The parking meter is a perfect example of this principle. If you want to use a desirable part of a public street, you pay the current value into a public fund. The parking meter principle should apply to all land. The simple mechanism to correct our revenue system would use present methods, equipment, and personnel, arriving by the test of the market at the desirability of all parcels and periodically adjusting appraisal and taxation to absorb the rent offered by the occupants. There is nothing of arbitrary opinion in this, nor would the rent be created by enactment. It would be a straight business matter, and little change would be needed in our laws.

Our failure to discern the difference between PRIVILEGE and SERVICE is stupid enough in its direct impact on our revenue policy, but it also creates a by-product, land speculation, which terribly hinders our progress and security. There is nothing spectacular about the land speculator. Quietly and conservatively he comes into possession of the title deed to a location, an area, for the purpose of (1) using it, (2) charging someone else for its use, or (3) selling his title at an increased price. If he uses it, he retains a public revenue. If he charges others for its use, he collects a public revenue. IN NEITHER CASE IS HIS MONEY USEFULLY INVESTED, and in both he hopes that the third purpose will be served. He hopes that more people will need the land, increasing its rental value.

When he buys it for the third purpose, straight speculation, to sell it later at a higher price, he becomes an obstructionist. He serves no good purpose. He does nothing useful. He is a legalized holdup man. He makes building, living, and working more expensive.

He could say to himself and to the community, "Someone will need this location in the near future; the growing population will make it more and more desirable; so, since the people will not collect what they create here, I will. I will get in this someone's way and prevent him from using this place until he pays me to get out of his way. I will not have to perform any service for him; the people will do that. He will not even get 'value received' from me because as soon as he begins to use the place, the people will fine him with 'taxes' for improving it. They fine anyone who builds a home or brings a business or service to their community. But they will not fine me; they are already letting me usurp a part of their wealth. I levy a tribute on progress. I capitalize other men's energies. The more they fine those who produce or render service, the more unearned value I gain." This is the unconscious soliloquy of the land speculator.

You may question this sweeping and positive singling out of land rents. What about Corporations? Monopolies? Bonds and Stocks? Capital?

Corporations are formed to perform service or to exploit through privilege, or frequently, to combine the two. To the extent that they perform service, they should retain their earnings, however great. To the extent that they exploit through privilege, they should not be supported by the law.

Monopolies, other than land, are simply opportunities for someone to get a little more than he deserves for what he gives, until competition or buyer resistance checks him.

Bonds and stocks are simply evidence of ownership in corporations that may be good and useful or evil and leechlike. Remove privilege, and they will adjust with the change.

Capital is a tool, and the man who creates it should retain what he earns from its use. The difference which sharply and cleanly separates land rental from payment for the use of buildings, tools, stocks in trade -- in short, from capital -- is that land costs nothing in human effort. Everything else is humanly produced. Money invested in the privilege of exacting tribute in the form of land rent is not capital. It is not usefully invested. "Capital is wealth used to create more wealth."

Resentment against big corporations is purely habit or label thinking. Most corporations spend fabulous sums in research seeking new products, processes, and economies, and you buy from them, not because you have to, but because you want their product. You can buy something else or do without. But you DO HAVE to have a little space on earth. That is a monopoly you cannot escape.

It would seem to be beyond dispute that the threat of depression would be remotely distant if the imbalance of our stupid taxation and the stifling barrier to our progress, land speculation, were both removed by recognition of this simple fact: THE RENTAL WHICH USERS WILL PAY FOR LAND IS THE TRUE EARNED PUBLIC INCOME. IT IS A VALUE CREATED BY THE PUBLIC. TAXATION OF INDUSTRY AND THE HOME IS UNJUST, ARBITRARY, AND DESTRUCTIVE. IT SEIZES PRIVATE PROPERTY.

When we learn this and adopt it for ourselves, we will be fitted to lead the world to prosperous peace.

March 19, 2010

This article describes some of the tax approaches that governments, mostly overseas, are turning to in order to plug holes in their budgets.

It is amazing that none seem to have thought about going back to basics, and drawing a larger share of the needed revenue from the one tax base that can be tapped without distorting the economy, without driving productive activity elsewhere, without taking from producers that which they produce.

It seems to me that a municipality, or state, or federal government should tap the annual value of the land within its borders before it starts to tax the wages or purchases of its people. If the municipality fails to collect that rental value, then the state ought to be able to do it; if the state fails to collect it, then the federal government ought to collect it.

And should the municipalities wise up and collect the lion's share of the land rent within their borders, the state and federal governments have other like tax bases they ought to be tapping: the value of water rights, of the airwaves, of geosynchronous orbits, of airport landing rights at busy airports, pollution, non-renewable natural resources such as oil, natural gas, lithium, etc. [The classical economists called all these things "land," as opposed to capital or labor, the other two inputs to production.]

They don't need to get creative. They need to go back to basics: tax that which nature provides; tax that which the community creates -- not what individuals and corporations create.

It is very tempting, of course, to recommend that We tax whatever I have the least of. That's the "don't tax you, don't tax me; tax the guy behind the tree" approach, and many people never move beyond it in their thinking about taxation. It is one of the factors that causes us to rely on taxes which fall on people who have relatively little. (Remember Leona Helmsley's statement -- "WE don't pay taxes; the little people pay taxes." -- I don't think she was talking about tax evasion; she was describing how we've structured things.)

When we tax wages, we take from people that which they create. We discourage them from working, from producing, from contributing.

When we tax dividends or interest, we discourage savings and investment. Our corporations need capital. (Notice, however, that when one buys an existing share of stock from another investor, the corporation is not getting a new infusion of capital; what is changing hands is the entitlement to an actual or potential stream of dividends, and to a payment of some size if management decides to sell the corporation to another corporation or some private entity.)

When we tax capital gains, what we are taxing is a mixed bag. Capital does not appreciate. As anyone who has left a home unoccupied for a few months knows, as anyone who has owned a car knows, buildings and machines and the like do not appreciate. They depreciate, even with the best of maintenance. Most "capital" gains are actually either appreciation of land, or relate to the extraction of scarce -- nonrenewable -- natural resources. (Much of what is taxed by the estate tax, too, relates to one of these kinds of gains, which have NOT already been taxed elsewhere in our system. Taxing them once per generation, particularly when there are huge concentrations, is better than not taxing it at all.)

When we tax sales of goods, or sales of services, we impose both on the purchaser and on the buyer; by raising the price of goods or services, we lower the demand for them.

When we tax corporate profits, we encourage corporations to move those dollars to another country. And they are happy to oblige.

When we tax transactions of various kinds, we discourage those transactions. That can be a good thing or a bad thing. If we are discouraging hedge funds from skimming profit away from the market, many would argue this is desirable. If we are discouraging the flipping of houses by making it less profitable, many would argue this is desirable. Some would argue that discouraging liquor, or tobacco, or recreational drug transactions is desirable. Some would argue that discouraging trade with other countries is desirable. (Others would take the position that Henry George took: that it is doing to ourselves in peacetime what other countries might seek to do to us in war!)

When we tax pollution, we should get less pollution.

When we tax buildings, we should expect to have slower redevelopment, poorer maintenance, less investment in energy-conserving technologies and renovations, fewer highrises and less vibrant cities. We will certainly have fewer people employed in these activities or in spaces created by them.

When we tax land value, what happens? To quote the eminent economist Lowell Harriss,

Land as area is fixed in quantity. Tax it heavily,
and it will not move to some other place, or decide to take a vacation,
or leave the inventory of productive resources by going out of
existence. Tax land lightly, and the favorable tax situation will not
create more space in the community.

But we don't have to figure this out over and over. Adam Smith, in The Wealth of Nations, provided us with the canons of taxation -- the criteria by which to judge the various options. You might take a look at these two pages on the subject:

All those goods and services whose effect is to maintain or increase property values -- land values, since buildings depreciate -- should be financed via taxes on land value. We should avoid taxing any of the other possible tax bases at all until we have fully taxed land value. (At this point, you might be wondering what it means to "fully tax land value." Generally, it means to collect something approaching 100% of the annual rental value of the land itself. Quick and dirty, that's about 5% of what the selling price of the land would be in the complete absence of a tax on it. So if a lot would currently sell for $100,000, while bearing no annual tax on land value, the annual land rent would be about $5,000. Land value taxes up to that amount do not place a burden on the landholder. Collecting 100% of that amount would reduce the selling price of the land to a token level, but would not reduce its annual rental value by a penny.)

I've not posted here in a while, though I've commented on individual articles on the Ipswich area newspapers' websites. It seems that, despite the terms of the trust which forbid the sale of the land, an agreement has been reached to sell the land to the tenants for the quite pitiful sum of $29,150,000.

A bit of background: about 350 years ago, a forward-thinking landholder in Ipswich (a town on the shore north of Boston, famous for its clams) donated for the benefit of the Ipswich public schools a magnificent almost-island called Little Neck. The trust required the Feoffees (trustees) to collect market rent on the land, and donate the proceeds to the town's public schools. Little Neck totals perhaps 27 acres, of which about 24 acres show up on the Ipswich assessor's database; the rest, I assume is the roads which wind around it.

For centuries, the land was used for farming, but early in the 20th century, the Feoffees recognized that farming was no longer the highest and best use of this scenic and well-located acreage, and they subdivided it into lots and permitted people to rent them and erect cottages on them. There are 167 cottages.

Today, less than half of the land is rented out to individual tenants: my spreadsheet, which is probably pretty close, suggests 10.32 acres rented to tenants and 13.88 acres held unrented by the Feoffees, but available to the tenants as Commons, for a total of 24.19 acres. There are beaches and a community center, a pier, a playground, playing fields. Presumably the Feoffees maintain these commons. A few years ago, a sewage plant was installed.

Houses on Little Neck are mostly small cottages, many under 1000 square feet and built between 1910 and 1935. Few have more than one bathroom. Most are seasonal; that is, they can under the terms of the land lease be occupied only from about April to January. 24 are year-round. I've not been able to figure out which ones, and I don't recall ever seeing one for sale in the times I've looked.

These cottages are old, weather-beaten and modest. Some have very appealing interiors, but tiny rooms and modest outfitting. Most are seasonal, and have no heat.They sit on lots which range from 0.041 acres (1,786 square feet) to 0.112 acres (4,879 sq ft), with most at 0.069 acres (3,005 sq ft).

Were they not on Little Neck, with its fabulous views and huge common spaces, its beaches and community amenities, these cottages would be worth no more than $50,000 to $100,000. (An 800 square foot cottage at $60 per square foot is $48,000. A 1200 square foot cottage at $80 psf is $96,000. $60 psf and $80 psf are excessive valuations for cottages built between 1865 and 1950. Houses depreciate, even with the best of care.)

Yet asking prices for these cottages when I looked 10 days ago were $175,000 (924 sq ft, built 1930) to $620,000 (1,779 sq ft, built 1910, waterfront).

What does this mean? It means that the current land rent being collected is nowhere near the market value land rent.

Currently, the Feoffees are collecting about $10,000 per year each for the 143 seasonal cottages, and a bit more for the 24 year-round ones. But the difference between the $50,000 to $100,000 value of the cottage itself and the asking prices of $175,000 to $620,000 represent capitalization of uncollected land rent -- Land Rent which the Feoffees are REQUIRED by the terms of the trust to collect!

Perhaps a year ago, or maybe it was two, I spent some time looking at the Ipswich assessor's database, and assembled a spreadsheet. I think I probably have 95% of the lots accounted for. I found some interesting things. In no particular order,

Occupied lots total 10.32 acres. The land represented by those lots was valued by the assessor at $30,990,200, or $3,004,382 per acre.

The per-acre assessed value of the occupied lots ranged from $2.6 million to $5.2 million

Untenanted lots are of two sorts:

one large one, listed at 39 Bay Road, of 11 acres, valued at $842,500, or $76,591 per acre

The untenanted lots, totaling 13.88 acres, were valued by the assessor at $1,761,300, or $126,941 per acre. Had they been valued at $3,004,382 per acre, their value would be $41,700,822.

Add together the $30,990,200 at which the assessor valued the occupied lots and the $41,700,822 for the untenanted lots -- the commons -- and the value of Little Neck's land would be $72,691,022.

The assessor valued the cottages on Little Neck at $14,857,592, an average of $88,968 per cottage, ranging from $38,700 to $223,600.

The assessor valued the tenant-occupied lots on Little Neck at from $161,600 to $343,500, with most falling at $185,500, or $228,700, or $290,000 to $300,000. (Perhaps differentiating a bit for views or for year-round occupancy rights)?

As a letter to the editor pointed out, the Feoffees don't own the land, and therefore can't sell it. They are merely trustees for the land. So the discussion about selling ought not to be happening at all.

But if somehow the powers-that-be determine that black is actually white, and up is actually down, then the Feoffees ought to be getting the full current value for the land. And they ought not to act as mortgage lenders. That is not within the terms of the Trust, and is nothing but trouble.

$72,691,022 divided by 167 cottagers works out to $435,275 per cottage -- quite a bit more than the $174,000 they're offering, to break the Trust which has been in place for 350 years.

Twenty years' purchase, or 5% of the $72.7 million, works out to land rent of $3.6 million per year. Divide that by 167, and the average annual land rent would be $21,800. Some would be worth more -- the larger lots, the ones on the waterfront, the ones with prime views, the ones with year-round occupancy rights -- and some would be worth less -- the smaller lots, the ones with less desirable views, the seasonal ones.

Would charging the market rent make Little Neck unaffordable to some of the current tenants? Yes, quite possibly. Did the Grantor of the trust make an exception for that? Or did he simply charge the trustees with collecting the market rent and being good stewards of the property, forever? The trust was not created in an attempt to be kind or generous to tenants; the beneficiary was explicitly named as the schools of Ipswich. If the interests of the tenants now somehow outweigh the interests of the schools of Ipswich, please tell me where to buy a new compass, because North is no longer North.

How will we know when the Feoffees are collecting the full market rent on the Little Neck property? When the selling price of a $50,000 cottage is $50,000. Until we see that, we'll know they're not collecting the full rent, but leaving a significant portion in the pockets of the cottage tenants. The difference between the $50,000 value of a cottage and the $250,000 PRICE of a cottage when the land rent is not being collected is enough to put a cottager's child or grandchild through college.

But the Trust was set up to benefit not the TENANTS' children but the children of the schools of Ipswich. Got it?

The Trustmaker gave Ipswich's public schools and Ipswich's community a very fine gift: a goose that he knew would lay golden eggs. The recent and current Feoffees may have failed to collect those eggs. That's past history. We can't change it. And it doesn't change the nature or terms of Mr. Paine's foresighted gift. Just collect the eggs. Keep feeding the goose. If the current group of Feoffees isn't so inclined, replace them with Ipswich residents who are. If necessary, hire professional staff; at $3.6 million in annual rent flow, volunteers can't do it all.

And, by the way, when you announce the schedule under which rents will be raised from current levels to market levels, a lot of cottages are going to go on the market. It will take a while for them to sell, and you'll see the prices drop. The cottagers will claim theft on the part of the Feoffees. They're wrong. Many of the cottages will be teardowns. The new owners will ponder for a while, and then begin to build interesting and attractive new homes there, within the constraints of those postage stamp lots. Preservationists will bemoan the loss of "historic cottages." Unhappy tenants will say sad goodbyes to summer homes whose full carrying cost they can't absorb. The grocery shopping and restaurant visits these 167 families -- and their tenants -- represent may fall off for a summer or two, while new owners build new cottages.

The construction trades in Ipswich will prosper (the Feoffees might be wise to prohibit construction work during the high season) and so will the town itself, for all sorts of reasons, including the rent flowing to its public schools.

Unless, of course, the stakeholders -- or the courts -- think that the interests of the tenants ought to be primary. In which case, please order me the new compass.

November 09, 2009

I came across an interesting table in a November, 2007, Federal Reserve Board Study entitled "First-Time Home Buyers and Residential Investment Volatility" by Jonas Fisher and Martin Gervais, and another version from "Why Has Homeownership Fallen Among the Young?" (FRB, March, 2009), by the same authors.

While median income (in real dollars) has fallen, the ratio of median house price to median income has nearly doubled, down payments at the median are down by over 1/3, and, perhaps most important, the proportion of after-tax income going to mortgage payments has nearly doubled, to 40%. Consider also that in 1976, most mortgages were fixed rate instruments, while by 2005, a very high percentage were adjustable rate mortgages, whose interest rate could rise by 2% at the end of the first year, raising that proportion higher in the second year.

And then, of course, in addition to paying 40% of after-tax income to the mortgage lender, our young people must also pay taxes: payroll taxes, wage taxes, sales taxes, taxes on their house and the land on which it sits. Those who have read this blog for a while will know that placing the largest share of our tax burden onto land value would have many desirable effects, including reducing the selling price of land to a nominal amount. Instead of borrowing from a mortgage lender a large sum to pay the seller for land value the seller didn't create, we'd pay land rent to our community, which would keep some of it for local purposes, and pass some up to the state and the federal government -- revenue which would replace some or all of the state sales and income taxes, and the federal income taxes.

And that 40% is mostly interest, not principle payment. Depending on the interest rate, in the first year of a mortgage, one pays 70% (at 4%), 78% (at 5%), 83% (at 6%), 88% (at 7%) 91% (at 8%) of one's mortgage payment as interest, and only 30% to 9% to pay down principle. The fact that, for some, mortgage interest isn't taxed, should be little consolation. (Why "for some"? Because for many families, the standard deduction is a better deal than itemizing deductions. Most homebuyers don't realize that, and assume they'll benefit as homeowners.)

Yet another FRB study, from May, 2006, showed that in the top 46 metro areas, on average, land value represented 51% of the value of single-family residential property. In San Francisco metro, the figure was about 88%; in NYC and Boston metros, it was well over 70%. Oklahoma City was the lowest, in the 20's range.

Homesellers reap gains they didn't sow. Mortgage lenders get to pocket large shares of young people's wages. There has to be a better way. Longtime readers will know what it is: shift our taxes onto land value, and off productive activity.

Table 2: Characteristics of First Time House Buyers

Statistic

1976

1986

1996

2005

Median Real Income

$35,972

$35,481

$33,151

$30,281

Median Price/Median Income

1.5

1.9

2.5

2.8

Mean Down-payment/Price

.18

.13

.12

.11

Mean Monthly Payment/After-Tax Income

.23

.30

.35

.40

Notes: The table entries are from various issues of The Guarantor,
1978-1998, the 2005 National Association of Realtors Profile of Home
Buyers and Sellers, and 2005 American Housing Survey. The Real median
income is based on the CPI. Mean Monthly Payment/After-Tax Income
before 2005 is from The The Guarantor. In 2005 we made an assumption
about the average tax rate, .25, to calculate this variable.

July 23, 2009

Smith—I have a proposition to make to you. Provide yourself with tackles and go to fishing, and I will give you half you catch.

Jones—I'll do that; thank you; you are very kind, indeed.

And the people laugh at Jones' foolishness and ask: "If he provides his
own tackles, what claim has Smith on the fish he takes? Ought not all
the fish belong to the man who catches them?"

We think so. But while about it, suppose you tell us the difference
between this proposition and the one that Brown made to Wilson when he
said: "Get your teams and plows and go to work raising potatoes, and I
will give you half the potatoes you raise."

Now, don't answer this question until you have thought over it just a little. — Living Issues.

Should we tax wages? Should indivdual (or corporate) landholders be permitted to pocket the land rent?

It seems to me that we as a society have a right to tax wages only after we've collected virtually all the land rent, and then only if we agree that the resulting revenue is insufficient to fund the legitimate purposes of government. (Reasonable people can differ about what ought to be done by the public sector; that's a separate conversation.)

Land rent here includes not only the rent on unimproved land values (that is, the value of each site before accounting for the improvements its owner has put on it himself or bought from someone else who did) but also on things like electromagnetic spectrum (the "airwaves"), primetime landing rights at congested airports, geosynchronous orbits, on-street parking in congested downtowns, the use of water where it is scarce, rights to pollute air and water, the withdrawal of scarce natural resources, etc.

Interestingly, the taxes on each are fairly similar: $4,853, $5,208 and $4,650.

What does one get for one's money? It varies. In the two small towns, a significant portion of the purchase price is likely to be for the structure, even with the large sites involved. In San Francisco, the bulk of one's purchase money is not for the structure, which is both small and modest, but for the location -- the proximity to jobs, to transportation, to all the amenities -- both publicly and privately provided -- of city life.

Quick and dirty, these homes are each probably worth $100 per square foot. The remainder of the value is locational value.

a 4 bedroom house in Shelburne Falls, MA, on 2 acres -- 2,741 square feet -> $274,000 house and $181,000 land (60/40)

a 1 bedroom apartment in San Francisco -- 641 square feet -> $64,000 house and $385,000 land (14/86)

a 4 bedroom house on 7 acres in Richmond, KY -- 3,233 square feet. -> $323,000 house and $142,000 land (69/31)

In the small towns, one is paying the seller mostly for value he (or a previous owner) created. In cities, one is paying the seller mostly for value he didn't create.

In each situation, property taxes are, more or less, 1% of the asking price. Assuming that the buyers put down 20% of the $465,000 ($93,000) and finance the remaining 80% ($372,000) with a mortgage at 6% for 30 years, they'll be paying $27,000 per year on the mortgage and $5,000 to their community in the first year. 85% of their carrying cost goes to the lender, 15% to the community.

Viewed another way, if we looked at this as if all the purchase money was borrowed, about 87% of the carrying cost goes to the lender and 13% to the community. And of that 87%, only 17% is principle; 83% is interest. That interest all leaves town. It isn't available for meeting the needs of the community, or of the borrower's family. It doesn't get recycled locally.

And, on top of that, the buyer continues to pay taxes on both the land and the building, and on their purchases and on their wages and most of their other income.

Can you picture how it would be if, instead of paying taxes based on one's wages and purchases and the house one occupies, one's taxes were primarily a function of the value of the land one occupied?

The buyer of the Shelburne Falls property would be paying on the basis of his $181,000 worth of land

the buyer of the SF property would be paying based on his $385,000 of land; and

the buyer of the Richmond property would be paying based on his $142,000 worth of land.

Were we to based our taxes on land value, the seller of the tiny San Francisco apartment would receive, say, $64,000 for his structure. And the buyer would not be taxed on that value by his community. Rather, he would be taxed on the value of the land he bought, paying, say, 5% of that value in the form of a tax on his land value: 5% of $385,000 is $19,250 per year. His mortgage payment on the $64,000 purchase would be $4,650 per year. And he wouldn't owe any other taxes.

Wouldn't that be a more just system? He pays San Francisco and California for the right to occupy that choice site. They recycle those funds locally to provide the services and infrastructure which make that site worth ~$20,000 per year, and send some on to the federal government.

This leaves the mortgage lender out of the loop. The homebuyer doesn't need to borrow $450,000; he only needs to borrow $64,000. The other funds are available for more productive purposes: financing businesses. Creating jobs. Maybe financing cars or other purchases.

May 23, 2009

That was the name of a bi-monthly magazine published from 1926 to 1940, successor to The Single Tax Review. I want to share its premise with you. It turns out that it was expressed a bit differently from one issue to the next. These come from the 1940 volumes.

WHAT LAND AND FREEDOM STANDS FOR

Taking the full rent of land for public purposes insures the fullest
and best use of all land. In cities this would mean more homes and more
places to do business and therefore lower rents. In rural communities
it would mean the freedom of the farmer from land mortgages and would
guarantee him full possession of his entire product at a small land
rental to the government without the payment of any taxes. It would
prevent the holding of mines idle for the purpose of monopoly and would
immensely increase the production and therefore greatly lower the price
of mine products.

Land can be used only by the employment of labor. Putting land to its
fullest and best use would create an unlimited demand for labor. With
an unlimited demand for labor, the job would seek the man, not the man
seek the job, and labor would receive its full share of the product.

The freeing from taxation of all buildings, machinery, implements and
improvements on land, all industry, thrift and enterprise, all wages,
salaries, incomes and every product of labor and intellect, will
encourage men to build and to produce, will reward them for their
efforts to improve the land, to produce wealth and to render the
services that the people need, instead of penalizing them for these
efforts as taxation does now.

It will put an end to legalized robbery by the government which now
pries into men's private affairs and exacts fines and penalties in the
shape of tolls and taxes on every evidence of man's industry and
thrift.

All labor and industry depend basically on land, and only in the
measure that land is attainable can labor and industry be prosperous.
The taking of the full Rent of Land for public purposes would put and
keep all land forever in use to the fullest extent of the people's
needs, and so would insure real and permanent prosperity for all.

Pretty short and sweet, isn't it? It might look out of date in this computer age -- though I would argue that it is not, even and especially in our most dense and developed cities -- but if you don't see its importance in the developed world, can you see that for the other 80%, including many places where American lives are at stake and our dollars being spent, it has huge relevance?

And as a means of ending poverty for the billions who do not get to reap the harvest of their own labor, it is of prime importance.

From the March/April issue:

WHAT LAND AND FREEDOM STANDS FOR

We declare:

That the earth is the birthright of all Mankind and that all have an equal and unalienable right to its use.

That man's need for the land is expressed by the Rent of Land; that
this Rent results from the presence and activities of the people; that
it arises as the result of Natural Law, and that it therefore should be
taken to defray public expenses.

That as a result of permitting land owners to take for private purposes
the Rent of Land it becomes necessary to impose the burdens of taxation
on the products of labor and industry, which are the rightful property
of individuals, and to which the government has no moral right.

That the diversion of the Rent of Land into private pockets and away
from public use is a violation of Natural Law, and that the evils
arising out of our unjust economic system are the penalties that follow
such violation, as effect follows cause.

We therefore demand:

That the full Rent of Land be collected by the government in place of
all direct and indirect taxes, and that buildings, machinery,
implements and improvements on land, all industry, thrift and
enterprise, all wages, salaries and incomes, and every product of labor
and intellect be entirely exempt from taxation.

ARGUMENT

Taking the full Rent of Land for public purposes would insure the
fullest and best use of all land. Putting land to its fullest and best
use would create an unlimited demand for labor. Thus the job would seek
the man, not the man the job, and labor would receive its full share of
the product.

The freeing from taxation of every product of labor would encourage men
to build and to produce. It would put an end to legalized robbery by
the government.

The public collection of the Rent of Land, by putting and keeping all
land forever in use to the full extent of the people's needs, would
insure real and permanent prosperity for all.

There are 167 tenants, who own homes but under the terms of the gift of the entire almost-island. Their individual lots total less than half of the total land area: 14 acres are kept as common space, including the 11-acre lot which holds the community center.

My initial research (shown in the first of those three blogposts) suggests that Ipswich's assessor valued the land for 2008 at $32,751,500, including a very low assessment of $1,761,000 for the 14 acres of common areas. If the common areas were assessed as the rented-out portions are valued, the total land assessment would be about $48 million.

The $26,500,000 asking price amounts to less than $160,000 for each building site. A 5% 30Y mortgage on $160,000 works out to a payment of $859 per month, or $10,307 per year, a not inconsiderable sum. One of the current real estate listings reports that land rent for a seasonal cottage lot is $9,700. (That 99 year old cottage of 1,710 sq ft carries an asking price of $620,000, down $5,000 from last year.)

So how much are the lots really worth? One way to find out would be to auction off the rental rights for two of the unoccupied lots not currently rented out. Make one a seasonal property, the other a year-round occupancy. Publicize the auction well, including a letter to every current Little Neck tenant, and accept bids for several weeks. Award the rental rights for each lot to the highest bidder, at $1 more than the amount bid by the second highest bidder. That will give the Assessor and the Feoffees a sense of the current market for this fabulous almost-island.

The proposed "endowment fund" for the benefit of the Ipswich Public Schools will never provide as much as the market rent, net of expenses, will provide. I do not understand why the Feoffees (that is, trustees on behalf of the schools, under the terms of a 17th century trust), or the voters of Ipswich, would ever consider selling this land, or why a probate court would permit the sale.

When the asking prices for Ipswich cottages begin to approach the depreciated value of the homes on them, the Feoffees will know that they are charging appropriate rents. When asking prices are 3, 4, 5 times the depreciated value of the cottages, it is clear that the Feofees are not collecting the full land rent, and the discount is being capitalized into the selling prices of the cottages. The terms of the trust require the Feoffees to collect the fair rent, and they ought to be required to get into compliance within, say, 5 years.

The tenants who assumed the Feoffees would never do it have my sympathy, but no tears.

April 29, 2009

A friend in the UK gave me permission to share his post here. You might explore Winston Churchill's writings on the subject, entitled "The People's Land" at wealthandwant.com/docs/Churchill_TPL.html. I'm on the fly today, and didn't copy in Jock's links. You might want to go to his original to pursue them!

Just a brief post to recall that today, 29th April, is the hundredth anniversary of David Lloyd-George's 1909 "People's Budget". Thanks to the wonders of the interwebs you can now read the whole budget online.

He ended (the main section - in the "Balance Sheet" section) with these words which have stood for a century accusing his successors of all parties for not having solved the problems he set out on the road to do:

"This, Mr. Emmott [in the chair of the Ways and Means Committee to which the budget was addressed], is a War Budget. It is for raising money to wage implacable warfare against poverty and squalidness. I cannot help hoping and believing that before this generation has passed away we shall have advanced a great step towards that good time when poverty and wretchedness and human degradation which always follow in its camp will be as remote to the people of this country as the wolves which once infested its forests."

From the financing of the newly created Old Age Pension and Disability insurance to the funding of the preparations for real war in the form of spending on Dreadnought battleships there was much for Lloyd-George to find in his budget. He didn't miss a trick, and more or less anything that could conceivably be taxed was, in many cases for the first time, taxed.

But for many of us it is for what ended up not being taxed that this budget is most remembered. The debate surrounding this budget, with speeches up and down the country by Lloyd-George himself and more notably perhaps Winston Churchill, must be one of the best documented in history, for it was a first attempt to implement some permanent form of Land Value Taxation. A tax shift that Churchill described as:

"the new attitude of the State towards wealth. Formerly the only question of the tax-gatherer was, "How much have you got?" We ask that question still, and there is a general feeling, recognised as just by all parties, that the rate of taxation should be greater for large incomes than for small. As to how much greater, parties are no doubt in dispute. But now a new question has arisen. We do not only ask today, "How much have you got?" we also ask, "How did you get it?

Did you earn it by yourself, or has it just been left you by others?

Was it gained by processes which are in themselves beneficial to the community in general, or was it gained by processes which have done no good to any one, but only harm?

Was it gained by the enterprise and capacity necessary to found a business, or merely by squeezing and bleeding the owner and founder of the business?

Was it gained by supplying the capital which industry needs, or by denying, except at an extortionate price, the land which industry requires?

Was it derived from active reproductive processes, or merely by squatting on some piece of necessary land till enterprise and labour, and national interests and municipal interests, had to buy you out at fifty times the agricultural value?

Was it gained from opening new minerals to the service of man, or by drawing a mining royalty from the toil and adventure of others?

Was it gained by the curious process of using political influence to convert an annual licence into a practical freehold and thereby pocketing a monopoly value which properly belongs to the State — how did you get it?"

That is the new question which has been postulated and which is vibrating in penetrating repetition through the land."

February 16, 2009

A Paper Read by Lawson Purdy of New
York
Before the League of American Municipalities,
in Session at
Chicago, September 26, 1906.

In 1873, Enoch Ensley, a wealthy planter of Tennessee, wrote to
Governor Brown asking him to call a special session of the legislature
to amend the constitution so that changes could be made in the tax laws
of Tennessee. The tax rate of Nashville was three and one-half per cent
and of Memphis four per cent, and Mr. Ensley said that the burden on
business was insupportable. Great land owner as he was, however, Ensley
did not urge a search for new sources of revenue, but rather the
application of the "rule or motto" which, he said, "It would be well
for the State to adopt and have cut into the stone at the capitol (in
large letters and have them gilded), in the Senate chamber, the hall of
the House of Representatives and in the governor's office, . . . to-wit:

"Never tax anything
That would be of value to your State,
That could and would run away, or
That could and would come to you."

This rule laid down by Ensley has become an axiom, but before it can be
applied the constitutions of about thirty-five States must be amended
by repealing those despotic limitations on legislative power which are
not found in the earlier constitutions, and which should find no place
in the constitution of any free people. Because of constitutional and
statutory restraints upon the power of cities we need discuss only what
can be accomplished in most cities by executive officials under
existing laws.

Conditions of Prosperity.

City officials often regard the city as apart and distinct from the
individual citizens, and sometimes therefore uphold policies which
appear to be in the interest of the city corporation, although opposed
to the interests of the citizens. This is, of course, a short-sighted
view. In reality nothing can be good for the city which is bad for the
citizen, nor bad for the city which is good for the citizens. Again,
many consider the interest of classes and speak of what will be
advantageous to manufacturers or shopkeepers or land owners. This, too,
is a mistaken attitude. Citizens should be regarded alike as men, and
not as the owners or users of some kind of property. All depend upon
the workers who render service for service, and it is fair therefore to
consider the interest of all citizens as bound up in the interest of
those who earn their living; and that city may be regarded as the most
prosperous in which it is easiest and most agreeable to earn a living.

The interests of the city and of its citizens are identical.
Nevertheless, they may be viewed from both standpoints.

January 23, 2009

There's a nice article in Saturday's Washington Post about Fairhope, Alabama, a town founded just over 100 years ago to put into action the ideas of Henry George. It sits on Mobile Bay.

Founded in 1894 as a utopian community based on the fair-tax theories
of economist Henry George, the town has long been a magnet for
intellectuals, Southern or otherwise; Sherwood Anderson, Upton Sinclair
and Clarence Darrow all spent time there. Even today, long since
subsumed into the greater Mobile metropolitan area, it remains a
popular place for writers, painters and craftspeople to set up shop.

Arden, Delaware, just outside Wilmington, does something similar, and it, too, is a lovely place to live.

The rest of Alabama might learn from Fairhope's fine example. (There are places in Alabama where sales taxes are as high as 10% ... not quite as bad as Chicago's, but awful nonetheless.) In most of Alabama, property taxes are quite low (see Susan Pace Hamill's work), and that underlies the state's problems. In Fairhope, the Single Tax
Corporation, which owns a significant chunk of the land, doesn't tax
the buildings, but charges each property owner in proportion to the
value of the land each occupies.

I know of a woman — I have never had the pleasure of
making her acquaintance, because she lives in a lunatic asylum, which does
not
happen to be on my visiting list. This woman has been mentally
incompetent from birth. She is well taken care of, because her father
left her when he died the income of a large farm on the outskirts of a
city. The city has since grown and the land is now worth, at
conservative estimate, about twenty million dollars. It is covered with
office buildings, and the greater part of the income, which cannot be
spent by the woman, is piling up at compound interest. The woman enjoys
good health, so she may be worth a hundred million dollars before she
dies.

I choose this case because it is one about which there can be no
disputing; this woman has never been able to do anything to earn that
twenty million dollars. And if a visitor from Mars should come down to
study the situation, which would he think was most insane, the
unfortunate woman, or the society which compels thousands of people to
wear themselves to death in order to pay her the income of twenty
million dollars?

The fact that this woman is insane makes it easy to see that she is not
entitled to the "unearned increment" of the land she owns. But how
about all the other people who have bought up and are holding for
speculation the most desirable land? The value of this land increases,
not because of anything these owners do — not because of any useful
service they render to the community — but purely because the community
as a whole is crowding into that neighborhood and must have use of the
land.

The speculator who bought this land thinks that he deserves the
increase, because he guessed the fact that the city was going to grow
that way. But it seems clear enough that his skill in guessing which
way the community was going to grow, however useful that skill may be
to himself, is not in any way useful to the community. The man may have
planted trees, or built roads, and put in sidewalks and sewers; all
that is useful work, and for that he should be paid. But should he be
paid for guessing what the rest of us were going to need?

Clarence Darrow wrote at least two excellent things I'd like to share:

How to Abolish Unfair Taxation which ends with "The "single tax" is so simple, so fundamental, and so easy to carry
into effect that I have no doubt it will be about the last reform the
world will ever get. People in this world are not often logical; in
fact, there is never any considerable number of them that are logical.
I am pretty sure the people will never get started in the right
direction; they will go a long way around."

The Land Belongs to the People which includes this: "This earth is a little raft moving in the endless sea of space, and the
mass of its human inhabitants are hanging on as best they can. It is as
if some raft filled with shipwrecked sailors should be floating on the
ocean, and a few of the strongest and most powerful would take all the
raft they could get and leave the most of the people, especially the
ones who did the work, hanging to the edges by their eyebrows. These
men who have taken possession of this raft, this little planet in this
endless space, are not even content with taking all there is and
leaving the rest barely enough to hold onto, but they think so much of
themselves and their brief day that while they live they must make
rules and laws and regulations that parcel out the earth for thousands
of years after they are dead and, gone, so that their descendants and
others of their kind may do in the tenth generation exactly what they
are doing today — keeping the earth and all the good things of the
earth and compelling the great mass of mankind to toil for them."

and

"Now the theory of Henry George and of those who really believe in the
common ownership of land is that the public should take not alone
taxation from the land, but the public should take to itself the whole
value of the land that has been created by the public — should take it
all. It should be a part of the public wealth, should be used for
public improvements, for pensions, and belong to the people who create
the wealth — which is a strange doctrine in these strange times. It
can be done simply and easily; it can be done by taxation. All the
wealth created by the public could be taken back by the public and then
poverty would disappear, most of it at least. The method is so simple,
and so legal even — sometimes a thing is legal if it is simple — that
it is the easiest substantial reform for men to accomplish, and when it
is done this great problem of poverty, the problem of the ages, will be
almost solved. We may need go farther."

January 17, 2009

In June, I posted a Landlord's Prayer, published in Henry George's weekly newspaper, The Standard, on January 22, 1887. That one was for landlords to be prayed by others, and appeared in Anglican prayerbooks. Now, another prayer, this one for the use of landlords, which apparently appeared in the London Democrat, and was picked up in the very first issue of The Standard, on January 8, 1887, recently posted at http://savingcommunities.org/docs/george.henry/standard0101.html:

Lord, keep us rich and free from toil,
For we
Are honored holders of Thy soil,
Which democrats would now despoil
With glee.
O! Lord, our fathers got the land
For serving those whom Thy right hand
Had chosen to be great and grand
As kings.
Tho' ta'en by force, we're not to blame,
Thou know'st, O! Lord, it is a shame
To say to us - of titled name,
Such things.

Lord, let us live in wealth's content,
And peace!
Lord, we are by Thy mercy meant
To rule mankind, and make our rent
Increase.
The birds that haunt the moors and hills,
The fish that swim in streams and rills,
The beasts that roam as Nature wills,
We own;
E'en Lord, the minerals that lie
Beneath the earth's periphery
Belong to us! Thou knowest why
Alone.

December 11, 2008

Eron Lloyd has an excellent post over at Daily Kos. He's writing about Philadelphia, but could just as well be writing about most American cities and towns. He writes,

At the Mayor's third town hall meeting last week on the budget cuts, I
was handing out our Philadelphia LVT brochure to people before the
meeting as usual when I had a brief but interesting exchange. A man
walking into the building took a quick look at my brochure and handed
it back, shaking his head. He said that he works for the city, and that
"there's no money in land" to solve the city's problems. ...

After the meeting, I decided to test this person's belief while walking
along Girard Ave. back to my car. Across the street were some vacant
lots that looked like they'd been empty for years. It appeared to be
about 3-5 lots in size, with huge weeds and junk all over the place.
Rather than describing it in detail, have a look for yourself.

Eron goes on to describe the property, the public records on it, and the location, and then tells us that the property is for sale. I'll leave it to you to read the rest of his post, and to consider how we currently finance public spending, and how the incentives affect our economy -- local and national.

President-elect Obama has proposed taxing high-income individuals and
using the funds to improve the solvency of the Social Security and
Medicare Trust funds. Existing taxes used to fund Social Security and
Medicare have only been applied to wages. Current proposals have been
vague about what type of tax base might be used in the new tax. This
note utilizes data from the Survey of Consumer Finances to compare
potential advantages and disadvantages of a wages-only tax base
proposal to a broader tax base proposal. Four different tax base
options,

broad income over $250,000,

wages over $250,000,

broad income
over $500,000 and

wages over $500,000

are considered. The results
presented here indicate the tax base (taxable income) on broadly
defined household income over $500,000 could be 28 times larger than
the tax base on wages over $500,000. ($737 billion compared to $26
billion.) The tax base on broadly defined household income over
$250,000 is $1,134 billion compared to a tax base of $460 billion for
household wages over $250,000. The broad income tax base allows for
lower marginal tax rates, lower reductions in labor force participation
among two-income households, and less substitution between wages and
other forms of compensation than the wage-only tax base.

Let me lay that out.

Aggregate household wage income over $250,000 of households with wages over $250,000 is $460 billion. That is the total of wages if we exempt the first $250,000 of wages. That's 2.5% of the population

Aggregate household income wage income over $500,000 of households with wages over $500,000 is $26 billion. That is the total of wages if we exempt the first $500,000 of wages.

Aggregate broadly defined household income over $250,000 of households with income over $250,000 is $1,134 billion. That is the total of income if we exempt the first $250,000 of income of any kind.

Aggregate broadly defined household income of households with income over $500,000 is $737 billion. That is the total of income if we exempt the first $500,000 of income of any kind. That's 0.8% of the population

November 01, 2008

I don't know how reliable the estimates involved are, but this article from a Pakistan website came across a google alert today. The property is a 1-acre teardown within a short walk of Manhattan's Grand Central Terminal:

ISLAMABAD:
The government has finally decided to sell the famous PIA-owned
Roosevelt Hotel in a bid to add some foreign exchange to the national
exchequer and has asked the Privatization Commission to arrange open
bidding to this end.

The commission hopes to get a minimum offer
of eight hundred million US dollars as compared to two hindered million
dollars the Shaukat Aziz-led government had expected for the hotel
located in the busiest commercial area of Manhattan in New York.

The
previous government was in haste to sell off the hotel apparently to
oblige some of its blue-eyed officials but shelved its plan following
the Supreme Court's ruling in the Pakistan Steel privatisation case.

In
the wake of the current economic crunch, the government has decided to
sell the hotel in the hope of getting handsome foreign exchange.

If you are one who thinks that land rent -- the value which the land itself would rent for each year -- is not a large enough tax base to provide much in the way of revenue, consider that this single acre, taxed annually at 5% of its proposed selling price, could provide $40 million each year in income to support the spending needs of NYC, NYS and the federal government. I don't know what NYC is collecting in property taxes on land and buildings, but it isn't much -- which is part of why the asking price can be so high.

Think what it would mean to shift $40 million worth of taxation off wages, off sales, off buildings!